Barclays iShares Bankrupcy - What Happens?

SavingTom11

Hi,

A general question as I have not found a definate answer so far.
I have a number of ETF's from iShares, I trade these via Halifax ShareBuilder.

As I understand it, the ETF funds liabilities are seperate between the funds, but as they are based in Ireland, I wonder what protections I have in the event they were to go bankrupt? I have looked at the prospectus and found the following snippet of info

For investors in the UK
Most of the protections provided by the UK regulatory system do not apply to the operation of the Companies, and compensation will not be available under the UK Financial Services Compensation Scheme on its default.

So does this mean that if the iShares company went down/or the parent company of Barclays, would any ETF investors simply be left with nothing ??

Also ontop of that if the Halifax/HBOS were to go bankrupt, because my shares are only held in a nominee account, where does the responsibility lie there, as it will of course not be my name against the share register?

Sorry for all the questions, just slightly concerned about the risks on the other organisations and how things work!

Thanks in advance!:D

alexp78

Hi.

I just found that quote in the prospectus too, and asked myself the same question.

iShares is owned by Barclays (London), but they seem clear that Barclays won't compensate. Being Dublin-based, it's foreign, and you need to declare the dividends as such in a tax return. I wonder whether it would be covered by the Irish government? They just declared unlimited compensation, but was this only for savings not including investments?

As far as the nominee holder for equities is concerned, my understanding is that you can claim compensation from the FSCS against them, so long as they are registered with the FSA/FSCS, and presuming they won't transfer the share holding to somewhere else on your behalf (which they won't because otherwise the same argument applies to any other wealth they might be hanging on to for the receivers). I'm not sure about this, but it follows the principle of possession being 9/10th's ...etc...

alexp78

Blah99

If the shares are in a nominee account and the dealer goes bust it won't make any difference - they still belong to you so can't be taken by creditors. Nominee accounts are basically like safety deposit boxes in this regard.

As for your other question, have a read of this:

http://www.dailywealth.com/archive/2008/aug/2008_aug_30.asp

zx2011

The Custodian of UK iShares is The Governor and Company of the Bank of Ireland, Lower Baggot Street, Dublin 2, Ireland

The Manager of UK iShares is Barclays Global Investors Ireland Limited, JP Morgan House, International Financial Services Centre, Dublin 1, Ireland

This is taken from the "iSHARES II PUBLIC LIMITED COMPANY, CONSOLIDATED SIMPLIFIED PROSPECTUS, 3 December 2007"

http://uk.ishares.com/literature/legal_information.do?docCategories=LEGAL_DOCS

http://uk.ishares.com/content/stream.jsp?url=/publish/repository/documents/en/downloads/prospectus_simplified_ishares_2_plc.pdf

I think that the "Custodian" is the body that has your interests in mind and acts likes a Trustee. I could be completely wroung though. It would be best to seek professional advice.

Under the FSCS scheme:

Investments: £48,000 per person.

100% of the first £30,000 and 90% of the next £20,000.

You will need to cheek that the FSCS will cover you.

miserable_ol_so_n_so

Sorry to sound unhelpful.....but methinks these questions could be decided only in the house of lords, by lawlords sitting taking many years to decide at great cost, perhaps 5million pounds. I shouldnt worry though, neither barclays nor halifax are gonna go bust.