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Issues when investment platform runs into financial difficulties
S_M
Posted: 06 June 2018 08:36:02(UTC)
#24

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Sara G;63456 wrote:
Looking at what the FCA is saying about Beaufort (https://www.fca.org.uk/news/news-stories/information-customers-beaufort-securities-limited-bsl-and-beaufort-asset-clearing-services-limited) it would appear that wind-up costs are covered by the £50K and that 90% of Beaufort clients will therefore get all of their money back with no costs deducted.

While not ideal, given than 10% if clients will lose money, this suggests to me that rather than limit holdings to £50K per platform (as I had feared might be necessary), an individual's pot could be substantially more than this and still be returned in full (assuming that the assets held are fairly liquid and not lost through fraud).

I am looking a bit more closely at Interactive Investor though... HL make a point of emphasising that they have no debt that would increase wind-up costs, and I'm not sure if the same would apply to ii following the TD acquisition, although they do say they are a financially strong company.


But that's not really the issue though is it Sara? It's how client monies where ringfenced.

Again due to lack of information, it is not clear if their funds were held in trust. This is from HL.

"All client money is held by us on trust and is segregated from our own funds in accordance with the FCA’s client money rules and guidance so that any creditors of Hargreaves Lansdown would have no legal right to it and we cannot use any of this money to cover Hargreaves Lansdown's obligations."

Here is more detailed guidance from the FCA handbook. It brings me out in a cold sweat just opening it up for the first time in quite a few years.

https://www.handbook.fca.../handbook/CASS/5/5.html

The FSCS should be considered as the last backstop if you hold funds with a reputable company.
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Mike L on 06/06/2018(UTC)
Mr Helpful
Posted: 06 June 2018 09:04:39(UTC)
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S_M;63452 wrote:
The key concern for investors on a stable platform is what would happen if a bank or investment house fails.

It seems that Banks are not allowed to fail, if (recent) history is any guide.
That seems to place them in a unique position?
S_M
Posted: 06 June 2018 09:17:36(UTC)
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Mr Helpful;63464 wrote:
S_M;63452 wrote:
The key concern for investors on a stable platform is what would happen if a bank or investment house fails.

It seems that Banks are not allowed to fail, if history is any guide.
That seems to place them in a unique position?


There have been banks that have failed down the years, apart from Lehman Brothers there was the BCCI many years ago.

Companies like HL it goes without saying will carry out the necessary due diligence.
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Mr Helpful on 06/06/2018(UTC)
Mr Helpful
Posted: 06 June 2018 10:11:33(UTC)
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S_M;63465 wrote:
Mr Helpful;63464 wrote:
S_M;63452 wrote:
The key concern for investors on a stable platform is what would happen if a bank or investment house fails.

It seems that Banks are not allowed to fail, if (recent) history is any guide.
That seems to place them in a unique position?

1. There have been banks that have failed down the years, apart from Lehman Brothers there was the BCCI many years ago.
2. Companies like HL it goes without saying will carry out the necessary due diligence.

1. Have corrected comment, as Gov'ts or deep pockets standing behind Banks in times of difficulty, is indeed relatively new.
2. HL being a plc, then if any unforeseen outrageous problems arose, would presumably be able to call on shareholders for financial support?

P.S. Re Lehman; compared to say Wachovia.
Different businesses, different outcomes.
J Thomas
Posted: 06 June 2018 17:17:14(UTC)
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Lehman Brothers were allowed to go bankrupt due to the fact they were strictly an investment bank.
To put it bluntly, a national UK retail clearing bank could never be allowed to fail. If say the news was announced at 4am on Monday morning that a large retail bank was not opening its doors due to insolvency, there would be riots outside said bank branches by 9am.
Customers would break into branches demanding their cash in notes, businesses could not open or operate, supermarkets, fuel stations, etc, would close, and no wages or debts could be paid. On the other side of the ledger, the government could not collect income tax, NI, VAT, or Corporation Tax, etc.
The contagion would spread and infect other UK banks the same day. Society would break down and there would be anarchy. Not being able to access our share accounts would be the very least of our worries.
What the government *may* do would be to dismiss the directors and send in a team of auditors to run the bank, and its clearing services, under government control through temporary public ownership.
This is why I use Halifax Share Dealing, backed by Lloyds Bank, and ultimately the UK govt.
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Mr Helpful on 07/06/2018(UTC)
mark spurrier
Posted: 06 June 2018 18:54:46(UTC)
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Three threads to this

1. The ability of a receiver or similar to use ring fenced client funds to meet their bills. That is a disgrace and I wrote to my MP about it. That is the Government colluding with the trade bodies.I suggest the auditors of the collapsed company has unlimited liability to fund the winding up

2. Investing with Beaufort. Beaufort has a trail of judgements against it. Beaufort took over Hoodless Brennan and Brennan was a Director until a couple of years ago. i will be circumspect about what I write here but the CEO of Hoodless was barred by the regulator as was Hoodless (that ban was lifted as they presumed he was incompetent not dishonest). I had many calls from HB...several in the same day. All about fantastic opportunities - offers that were oversubscribed yada yada yada. They were fined for buying up stock in issues that they were running so that the offers were 100% taken up and then reselling the shares in the oversubscribed offer to punters without letting on that they had been the primary buyers

Two minutes of research would have shown any sane person that they should think very carefully about having any contact with Beaufort

3. maybe the FCA should explain why they allowed firms with a track record of accidents to operate. I guess it is true that some people are really muppets and they should just send me their money before someone takes it from them but there was a track record of people back to 2003 and earlier who seem to have had a continuity of unfortunate oversights of regulatory rules which resulted in them making money and moronic punters losing theirs

I guess I could use "unwary" instead of "moronic" or "muppets" but really.........people do need to make an effort


BTW I am getting many calls from a fine gentleman who appears to be in Equatorial Guinea. Due to an accident he bought way too many Adobe shares and now wants to sell them off at half price to get rid of them quickly. he will accept SWIFT payments, Paypal or debit cards. If anyone is interested please let me know and I will put you in touch. I am sure it will be fine

and the last thing. If there is no extradition arrangements between UK/EU and the country your benefactor is working from, there may be a reason for that. It is no accident that virtually the entire binary betting business is in Israel
xcity
Posted: 06 June 2018 19:31:37(UTC)
#27

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Ring fenced assets can't be used to pay debts or bankruptcy costs of a broker or platform.

Ring fenced assets can be used to establish who owns the assets.

Beaufort isn't the first, though PWC seems greedier than most.

The key is the efficiency of the administration of the assets. If the accounts are correct for who owns what then any administration costs on bankruptcy will be low. So it's worth looking at every indication of back office inefficiency.
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