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Beaufort
Peter Sumner
Posted: 01 June 2018 15:55:31(UTC)
#21

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Here is my reply from HL re access to nominee accounts.

"I can confirm that client money could be used to pay for administration fees,provided that Hargreaves Lansdown had no other money and that the administrators were unable to cover these fees using funds elsewhere . In this event the FSCS would cover clients losses up to £50,000. I can also confirm that this is a point of law and is not specific to HL."
Not a nice thought that a third party could access your account to choose which shares of yours to sell to pay themselves.
4 users thanked Peter Sumner for this post.
john brace on 01/06/2018(UTC), Tim D on 01/06/2018(UTC), Keith Cobby on 01/06/2018(UTC), c brown on 12/06/2018(UTC)
Tim D
Posted: 01 June 2018 17:42:37(UTC)
#22

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If there's £50000 per client up for grabs (assuming enough clients have at least £50000 in their portfolios), you'd really hope that'd be enough to wind up any mess at the big providers (HL claimed to pass the million client landmark last year).

Perhaps the trick would be to persuade any administrator to take a "flat fee" off everyone's holdings (which, assuming it's less than £50K, they could all claim from FSCS) rather than hitting clients for an equal proportion (is that what's happened with Beaufort?) which would leave winners and losers.
Keith Cobby
Posted: 01 June 2018 18:27:52(UTC)
#23

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So the reality is that regulations pertaining to the protection and ring-fencing of client money are worthless. The Government encourage investment in ISAs and SIPPs which have to be held in nominee accounts, knowing that an administrator can help themselves to those funds above £50k. Whilst a dreadful situation for Beaufort clients, the rest of us have been done a huge favour.
3 users thanked Keith Cobby for this post.
Tim D on 01/06/2018(UTC), Peter59 on 01/06/2018(UTC), andy on 02/06/2018(UTC)
retired investor 2
Posted: 02 June 2018 14:30:55(UTC)
#24

Joined: 26/01/2012(UTC)
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Why does HL write to clients suggesting consolidation of client ISAs etc with them if they know that this reduces the total cover for compensation? Even before Beaufort this seemed like poor practice,post Beaufort it seems to verge on miss selling to me.

FCA has advised on the phone that they are considering what to say in response to the numerous comments they have appear to have received on the Beaufort debacle. They seem to realise that the financial industry has been keeping quiet about the albeit small risk of a large loss as shown by Beaufort, which seems like a systemic industry wide issue. The industry likes to say client money is protected by regulation which even more evidently is not true following Beaufort.
4 users thanked retired investor 2 for this post.
Mr Helpful on 02/06/2018(UTC), Harry Trout on 02/06/2018(UTC), Keith Cobby on 02/06/2018(UTC), john brace on 02/06/2018(UTC)
Alan Selwood
Posted: 03 June 2018 22:39:12(UTC)
#25

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Today's Sunday Times has a full-page article about the Beaufort fiasco.
Worth a read!

I think the key changes in rules and security for investors in the future have to be:
a) The ability to hold all assets, whether ISA, SIPP or Dealing Account, in a CREST account, as this would do away with the division between 'beneficial owner' and 'actual owner', since all assets would be held directly by the investor, not via nominees,
or
b) Full insurance to be held by all platforms for 100% of client asset value, with the beneficiaries of the insurance being the investors directly, not the platform or any trustee,
or
c) The Compensation Fund to separately cover up to £5 million per account for each client. Even the very largest private investors would then have 100% security if they spread their assets around several different platforms,
and
d) The repeal of Rule 135 which permitted administrators to take their fees out of ring-fenced assets.


I am still waiting for a reply from my MP about the parts of my original email which he did not answer the first time..........

(Chase-up time coming soon!)

I read the other day that where an MP ignores correspondence from constituents, a letter to the Chief Whip may encourage the MP to do what he is paid to do.
7 users thanked Alan Selwood for this post.
Mostly Retired on 04/06/2018(UTC), Captain Slugwash on 04/06/2018(UTC), Keith Cobby on 04/06/2018(UTC), john brace on 11/06/2018(UTC), Peter59 on 11/06/2018(UTC), Tim D on 11/06/2018(UTC), c brown on 12/06/2018(UTC)
Malcolm Beaton
Posted: 04 June 2018 08:36:33(UTC)
#26

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Hi Alan
Can I thank you on behalf of us all on your work in this area
It is of vital importance to all of us
I am an Alliance Trust Savings platform user
I noted straws in the wind about a platform upgrade and forwarded the message board here on Barclays Investors
Also sent the posts re Aegon/Cofunds
Their Platform remains highly functional-a bit clunky-but it does the business at a reasonable cost
We all want progress but not at the customers expense
I realise that the Beaufort scandal is a different problem but it is linked
Your efforts with MPs much appreciated
xxd09
ShareSocUK
Posted: 11 June 2018 12:15:39(UTC)
#27

Joined: 13/05/2018(UTC)
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The latest on the Beaufort campaign with update 3 is available here: https://www.sharesoc.org...ient-campaign-update-3/
5 users thanked ShareSocUK for this post.
Sara G on 11/06/2018(UTC), Tim D on 11/06/2018(UTC), Alan Selwood on 11/06/2018(UTC), Nigel G on 11/06/2018(UTC), c brown on 12/06/2018(UTC)
jvl
Posted: 11 June 2018 14:40:58(UTC)
#28

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This situation is making me look at other providers to spread my SIPP around.

My local MP is a Labour one. I'm a touch cynical perhaps but I doubt she'd be interested in anyone who had over 50k in a SIPP even if it were that person's only assets.

Perhaps if enough of us wrote to our SIPP and ISA providers, telling them that, far from consolidating our assets with them, we're going to do the opposite, spreading money around because of the paltry 50k limit and the incomplete ring-fencing, big providers such as HL would start getting more involved in the campaign?
2 users thanked jvl for this post.
Tim D on 11/06/2018(UTC), c brown on 12/06/2018(UTC)
Tim D
Posted: 11 June 2018 19:55:15(UTC)
#29

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jvl;63708 wrote:
My local MP is a Labour one. I'm a touch cynical perhaps but I doubt she'd be interested in anyone who had over 50k in a SIPP even if it were that person's only assets.


Might be worth having a browse of your MPs history and interests at https://www.theyworkforyou.com/

Folks with MPs on the Work and Pensions Committee would be in a particularly good position to influence things: https://www.parliament.u...s-committee/membership/

I'd also hope MPs with a bit of real world business experience who are likely to have built up some assets themselves are more likely to be sympathetic than career politicians with many years accumulated with the MPs' own DB scheme.

Personally, I'd be inclined to make the point that if nominee-held SIPP accounts can't be shown to be secure people will surely opt for safe-as-houses pension assets instead, pouring more fuel on the house price bubble/affordability crisis etc.

jvl;63708 wrote:
Perhaps if enough of us wrote to our SIPP and ISA providers, telling them that, far from consolidating our assets with them, we're going to do the opposite, spreading money around because of the paltry 50k limit and the incomplete ring-fencing, big providers such as HL would start getting more involved in the campaign?


Hmmm.... less convinced by this; overall the providers would probably benefit from people spreading their assets around (flat fee or capped fees would stop being so efficient, and even if I only wanted to hold one Vanguard Lifestrategy fund, it'd surely cost more in dealing fees to do it on multiple platforms than one).
1 user thanked Tim D for this post.
Sara G on 11/06/2018(UTC)
Alan Selwood
Posted: 11 June 2018 22:48:23(UTC)
#30

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I notice that it has been announced that Lord Lee will be raising the whole matter in Parliament on Wednesday this week.

Given his standing in the House of Lords, the value he has tied up in ISAs, his long experience as an investor and the common-sense nature of his articles about investment generally, I do hope that his views will have a serious impact on the way that the current system works by making those who create the rules decide that changes need to be made.

We really do need a root-and-branch alteration in the way things are currently done.

All investments held by or on behalf of investors should be totally ring-fenced, regardless of any desires by platforms, administrators, liquidators, political bodies or regulators to cut costs by making it possible to seize client securities or cash to pay bills that are not directly attributable to those investors.

If they do not do this, then as a second-best approach, all parties engaged in holding or administering client securities or cash should be required to hold proper insurance to indemnify the client against malpractice, embezzlement, administration or liquidation of any bodies whose actions create or have created a situation where the client's assets are put at risk through no fault of the client, with the benefits payable directly from the insurance company's fund to affected clients, and not to any intermediary who might cause further losses by greed, incompetence or malpractice.

As with safety issues where negligence has occurred, individuals who control firms whose actions lead to client loss should be personally liable for providing financial compensation directly to disadvantaged clients out of their own assets, if they have failed to create proper financial safeguards to protect the investors.

If regulators and governments cannot agree on any of the above, they should by default then have to allow all assets, whether SIPP, ISA or otherwise, to be held directly by the investor in their own personal Crest account so that there is no intermediary whose actions can affect the security of the investor's assets.
Although many might argue that SIPP and ISA funds must be held by a platform to prevent investors inventing figures about their tax allowances in order to gain unfair tax exemptions, etc, it should in reality be quite straightforward to apply suitable record-keeping flags to a Crest account, so that spot checks can be made, and anyone bending the rules brought to book (possibly by being banned from using such tax-exempt funds for life and having an automatic fine of 3 times the amount of tax lost to their fraud).

Although there are few brokers at present who are willing to get involved with personal Crest accounts, I am sure that if rules were changed as above, dozens of firms would suddenly decide to get involved!

Finally. on behalf of all Citywire posters, I would like to thank ShareSoc for their efforts in trying to get changes to these most unsatisfactory aspects of client security.
11 users thanked Alan Selwood for this post.
Tim D on 11/06/2018(UTC), Mostly Retired on 12/06/2018(UTC), Captain Slugwash on 12/06/2018(UTC), Tony Peterson on 12/06/2018(UTC), Harry Trout on 12/06/2018(UTC), andy mac on 12/06/2018(UTC), john brace on 12/06/2018(UTC), Sara G on 12/06/2018(UTC), Jeff Liddiard on 12/06/2018(UTC), c brown on 12/06/2018(UTC), Margaret D on 12/06/2018(UTC)
Tony Peterson
Posted: 12 June 2018 06:25:52(UTC)
#31

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And benefiicial owners of securities held in ISAs and SIPPs should get the voting rights, rather than nominees, as at present.
5 users thanked Tony Peterson for this post.
Sara G on 12/06/2018(UTC), Tim D on 12/06/2018(UTC), c brown on 12/06/2018(UTC), Jeff Liddiard on 12/06/2018(UTC), Alan Selwood on 12/06/2018(UTC)
c brown
Posted: 12 June 2018 10:36:58(UTC)
#33

Joined: 14/02/2013(UTC)
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Have written to my MP & will post response here. I also mentioned the Ill health & possible suicides that can happen from such stress. All companies should be made to have insurance or why can't we hold isas in Crest accounts.
2 users thanked c brown for this post.
Jeff Liddiard on 12/06/2018(UTC), Alan Selwood on 12/06/2018(UTC)
Alan Selwood
Posted: 12 June 2018 16:41:36(UTC)
#32

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Tony Peterson;63735 wrote:
And benefiicial owners of securities held in ISAs and SIPPs should get the voting rights, rather than nominees, as at present.


I agree entirely with this point, and of course if SIPPs and ISAs were able to be held in Crest accounts, this would happen automatically.

Nominees for ISAs and SIPP accounts are only an administrative convenience and a way of keeping investors from taking advantage unfairly of various tax exemptions by placing a 'trustee-lookalike' between the client and the assets. In my view, only genuine trust situations should require some form of trustee, such as where someone has to administer assets on behalf of a minor or someone lacking mental competence, where assets have been given away by living donors but are not yet to be distributed to beneficiaries, or where assets need to be collected in on death ready for distribution according to the terms of the will or equivalent.

I believe the following is workable.

Proposed ISA account, new-style:
Client applies for a Crest account, specially designated as a 'Crest ISA account'.
A broker is selected by the client and employed for an agreed fee, to carry out these tasks in connection with the Crest account:
(a) to arrange purchases and sales of assets
(b) to keep a copy of the records supplied by Crest on a day-to-day basis to ensure that system errors can be located and eradicated, in the event that the Crest system's original information is lost or corrupted
(c) to upload details of ISA subscriptions received during the tax year to a central ISA database, so that subscription limits can be correctly monitored for tax purposes
(d) to record transfers in or out of the ISA Crest account, to or from other Crest ISA accounts in that client's sole name and upload them as above

Being a Crest account, the client is the true, direct owner of the assets held in the account, and not just a beneficial owner of assets 'owned' by a nominee. This entitles the client to receive all communications directly from the registrar that handles the asset administration, including voting documents, notices of takeover bids, details of dividends payable, etc.
Being a Crest ISA account, the default setting for dividends would be 'pay into the Crest account', but could of course be set to 'pay dividends from companies listed below to the client bank account xxxxxx'.

A very similar approach could be taken for Crest SIPP accounts, but probably with extra safeguards built into the reporting done by the nominated Crest account broker, so that pension rules are not flouted.

What's not to like?


5 users thanked Alan Selwood for this post.
Jeff Liddiard on 12/06/2018(UTC), Tony Peterson on 12/06/2018(UTC), Sara G on 12/06/2018(UTC), andy mac on 12/06/2018(UTC), Captain Slugwash on 12/06/2018(UTC)
Jeff Liddiard
Posted: 12 June 2018 16:53:01(UTC)
#34

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So Alan, will you be sending a copy of your posts 30 and 32 to your MP, or is there another or additional way to suggest this to whomever?
Alan Selwood
Posted: 12 June 2018 17:02:59(UTC)
#35

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A good point.

No doubt ShareSoc is monitoring this thread carefully too, and will, off its own bat decide whether any of the content merits action by them.

If it doesn't infringe Citywire copyright, why not copy the 2 threads, including the 'thanks' list at the bottom, and send it to your own MP with your own endorsement of whichever items have your own fullest support?

After all, if a series of comments are seen to attract full and rapid support from a group of interested people, it must signify something to anyone with half a brain.
2 users thanked Alan Selwood for this post.
Jeff Liddiard on 12/06/2018(UTC), Tony Peterson on 12/06/2018(UTC)
mark spurrier
Posted: 12 June 2018 17:49:51(UTC)
#36

Joined: 17/01/2018(UTC)
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I have had a reply from my MP

I wrote a two prong mail


1. Ringfencing
2. Who let Beaufort stay in business - it wasn't as though they were pillars of virtue having subsumed Hoodless Brennan


Response was a bit weak on Point 1... you can't expect them to work for free.. rather bizarre I think.

point 2. Much more involved

I responded that the auditors should be paying the receiver........
All auditors to carry liability insurance......those auditing above their weight are out of business as they get no cover

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