If your share platform did a Madoff

Glen_Clark

bigadaj wrote: »

Yes but generally the guarantee is multi layered. As well as being held in separate accounts assuming different funds then those funds also have the cover. Obviously doesn't help with fraud but that's possibly a reason to stick with the larger platforms?

As I understand it, cash is held in a bank account which gives the investor the same £85k protection he would have if it was in his own name. I don't know if he would still have the same protection if he already had another £85k in an account with the same bank. But the cash is not my point.
The point of the Madoff fraud is the shares only existed on some fraudulent document produced by Madoff - he simply pocketed the money himself without buying the shares. I have no reason to think anyone else is doing this, I have never even heard anyone suggest that, its only a thought that came into my head, But how do we know?

IronWolf

If you have a significant sum of money then in my opinion there is no reason to use nominee accounts and you should use a traditional broker. The increases costs are a small price to pay for the insurance of actually having your name on the register.

The exception is ISA's which have to be nominee's. The best advice I can give is to choose a reputable broker that is in a financially sound position. Fraud is more likely to occur if your broker is in financial difficulties.

EdGasket

There are plenty of brokers so once you have £50K with one, start another account if you are worried.
I have my pension with one provider which is >£50K but it becomes uneconomic to have income drawdown from several smaller pensions so no choice really.
I do think it wrong that nominees can loan out your shares to short-sellers; what if they can't return them?

Glen_Clark

EdGasket wrote: »

I do think it wrong that nominees can loan out your shares to short-sellers; what if they can't return them?

particularly when the fee for loaning your shares out goes to the fund manager, not your fund!!

Glen_Clark

IronWolf wrote: »

Fraud is more likely to occur if your broker is in financial difficulties.

.... and perhaps more likely to be in financial difficulties where fees are driven down by internet competition.
I have done most of my trades direct by telephone. Fees may be £60 rather than £6 online. But I can keep the money earning interest until the last moment (although that doesn't count for much now) and have the dividends paid directly into my account, so there is less money sitting in a broker's account earning about 0.01% A compromise might be to buy online then transfer the shares out, costing about £25.
But lets not get paranoid about this. Its nothing more than an idea that came into my cynical head. For all I know there may be a reason why brokers cannot do a Madoff now.

lvader

EdGasket wrote: »

There are plenty of brokers so once you have £50K with one, start another account if you are worried.
I have my pension with one provider which is >£50K but it becomes uneconomic to have income drawdown from several smaller pensions so no choice really.
I do think it wrong that nominees can loan out your shares to short-sellers; what if they can't return them?

Too costly, no thanks.