How safe is your cash within Trading platforms?

C_Mababejive

Im thinking the big players such as TDW/III/HL etc...

For instance,,

1)You hold shares in a trading account. Are you the real owner or does the likes of TDW own them and simply credits you with their value in the account? If TDW went bump,would your shares be ringfenced?

2)Funds held in say,,HL...If you bough units in the acme Bric fund OEIC fund and Acme went bump...would you lose everything?

3)Again,as above,if the likes of HL folded what protection would you have?

BettySpofkins

Hi -

1) you own them for sure. The broker might hold on to the certificates, but the shares are absolutely yours. You might have some inconvenience pulling them out of the rubble, of course, but you won't lose them.

2) check the specific documentation for Acme, but again, you typically own the shares, not the fund manager. Funds are typically structured as an actual company, separate from the management company, for exactly this reason.

I'm not sure how question 3 differs from question 1, apologies if I'm being dim.

It's worth noting there's some cover for any actual losses through the FSCS. It's not as large as the 85k cash coverage, but it's there. Hopefully others can clarify.

jimjames

#2, if the investment company went bust the investments you own should be safe. That assumes the reason it went bust is not down to fraud. I guess any money you are in the process of investing may be at risk but even that should be in the client account not their own books.

grey_gym_sock

the investments owned by Acme BRICK Fund will be legally owned by a nominee company, but that company is not the beneficial owner of the investments, so the creditors or owners of the nominee company have no claim on those investments, and it doesn't matter if they go bust. often the nominee company is a non-trading subsidiary of Acme Investment Management. or it could be a (subsidiary of a) third-party company.

the units in the Acme BRICK Fund itself will be owned by another nominee company, this time associated with, or appointed by, the platform you're using (e.g. HL). again, the separation between legal and beneficial ownership protects you if everybody goes bust.

this is all assuming that everything is placed in nominee companies as it should be. either fraud or incompetent administration could mean that it isn't as it should be. and there's no way of verifying that everything is as it should be.

if there is fraud or maladministration, and assets are missing, then whoever is responsible would be liable to replace them. if they can't meet their obligations, the FSA would declare them to be in default, and then pay up to £50k compensation to each investor in respect of each company in default.

how uninvested cash is held depends on the platform. some hold it in a nominee account at a third-party deposit taker. some are themselves deposit takers. read your T&Cs.

whoever is the deposit taker, if they can't pay, you get the standard £85k maximum compensation. but that's across all your accounts with 1 deposit taker. you might have accounts both directly and via platforms.

BettySpofkins

Aha good, if it is the full 85k that's better than I thought.

dtaylor84

The £85k limit applies only to cash deposits. Otherwise the limit is £50k.

Totton

There is a decent guide on this at http://www.hl.co.uk/investment-services/vantage-service/how-safe-is-your-investment

HTH,
Mickey