Are these investments safe - Investec

stevemc5267

I'm considering investing some monies into an Investec Guaranteed 5 Year FTSE 100 Kick-Out Plan which has been recommended to me by an IFA and I wanted a second oppinion if anybody can help.

My question is would my £50,000 be covered by the governments compensation scheme if either HSBC of Investec Bank went under?

I have copied below extracts from the brochures if anyone could give me any guidance.

Your investment will be an equity-linked
structured deposit that is backed by securities
and instruments that are designed to match the
Investment Objectives of the Plan.
From the Investment Date your deposit will be
held with Investec Bank plc.

When Investec Bank plc receives your investment, it will be deposited into a Client Money account
at HSBC Bank plc (‘HSBC’) until the Investment Date. In the event of Investec Bank plc’s insolvency
during this period, your money will be protected. However, there is a risk that HSBC may fail to meet
its obligations. In the event of HSBC’s insolvency, your money will not be protected and you must rely
on your right of recourse to the Financial Services Compensation Scheme. You may lose all or part of
your initial investment.

• At the Investment Date your money will be pooled and transferred to an account at Investec Bank plc.
There is a risk that Investec Bank plc may fail to meet its obligations between this transfer and the
maturity of the deposit. In the event of Investec Bank plc’s insolvency your deposit will not be
guaranteed and you must rely on your right of recourse to the Financial Services Compensation
Scheme. You may lose all or part of your initial deposit. Investec Bank plc’s capacity to meet its

financial commitments is considered stable by a leading credit rating agency, FitchRatings.

Thanks

m5rcc

stevemc5267 wrote: »

I'm considering investing some monies into an Investec Guaranteed 5 Year FTSE 100 Kick-Out Plan which has been recommended to me by an IFA and I wanted a second oppinion if anybody can help.

My question is would my £50,000 be covered by the governments compensation scheme if either HSBC of Investec Bank went under?

I have copied below extracts from the brochures if anyone could give me any guidance.

Your investment will be an equity-linked
structured deposit that is backed by securities
and instruments that are designed to match the
Investment Objectives of the Plan.
From the Investment Date your deposit will be
held with Investec Bank plc.

When Investec Bank plc receives your investment, it will be deposited into a Client Money account
at HSBC Bank plc (‘HSBC’) until the Investment Date. In the event of Investec Bank plc’s insolvency
during this period, your money will be protected. However, there is a risk that HSBC may fail to meet
its obligations. In the event of HSBC’s insolvency, your money will not be protected and you must rely
on your right of recourse to the Financial Services Compensation Scheme. You may lose all or part of
your initial investment.

•

At the Investment Date your money will be pooled and transferred to an account at Investec Bank plc.

There is a risk that Investec Bank plc may fail to meet its obligations between this transfer and the
maturity of the deposit. In the event of Investec Bank plc’s insolvency your deposit will not be
guaranteed and you must rely on your right of recourse to the Financial Services Compensation
Scheme. You may lose all or part of your initial deposit. Investec Bank plc’s capacity to meet its

financial commitments is considered stable by a leading credit rating agency, FitchRatings.

Thanks

Theorectically, yes - FSCS does not solely cover deposits only.

Investec Bank plc is a participant of the FSCS. Should Investec Bank plc be unable to meet its financial obligations, you will be entitled to make a
claim for compensation from the FSCS provided you meet the eligibility criteria of the FSCS. The maximum cover available is £50,000 per authorised institution for a sole deposit account, or £100,000 per authorised institution for a joint deposit account.

G_M

My understanding is that the £50K compensation scheme applies to bank deposits (eg savings accounts) rather than equities.

m5rcc

Oops, meant to quote you, not thank you! Ha!

FSCS does NOT soley cover deposits.

With regards to the question in hand, stevemc5267, the following must apply:

For an investment claim to be eligible to receive compensation from us, it must meet ALL of the following criteria:
(a) the advice you received to buy the investment must have been given on or after 28 August 1988; AND
(b) the firm that advised you must have been authorised by the appropriate regulator to do so at that time; AND
(c) you must have lost money as a result of the advice you were given; AND
(d) the firm (or its principals) no longer has sufficient assets to meet claims for compensation.

isofa

G_M wrote: »

My understanding is that the £50K compensation scheme applies to bank deposits (eg savings accounts) rather than equities.

From here: http://www.fscs.org.uk/consumer/key_facts/

FSCS protects:
* deposits,
* insurance policies,
* insurance broking (for business on or after 14 January 2005), including connected travel insurance where the policy is sold alongside a holiday or other related travel (e.g. by travel firms and holiday providers) (for business on or after 1 January 2009);
* investment business, and
* home finance (e.g. mortgage) advice and arranging (for business on or after 31 October 2004).

More details on the Investment Claims FAQ here: http://www.fscs.org.uk/consumer/faqs/investment_claims_faqs/

G_M

My mistake. Good news!

Myrmidon_J

It is important to note that often, if you are investing in a structured product such as this, the risk is actually associated with the counterparty, not the product provider.

Whilst the money is "in transit", it might be Investec Bank or HSBC that hold funds; during the five year investment term, however, it may well be another institution.

Many individuals suffered total (or near total) capital loss when Lehman Brothers went under - not that the institution selling the product was insolvent. It is counterparty risk that is crucial here.

Yet another reason to be generally suspicious of structured products, in my opinion!