FSCS, Investments and Platform Nominee Accounts

TCA

mulronie wrote: »

The £50k FSCS amount is about cash on deposit with the broker, not the assets the broker holds on your behalf in a nominee account.

I can't see that anyone in their right mind would have >£50k just idling in cash with a stockbroker. That's not a winning investment strategy...

As per grizzly's reply I think you're wrong. Per the Q&A on the FSCS website:

Are investments held by nominee companies covered?

Authorised investment firms such as stockbrokers may arrange for your shares to be registered in the name of a nominee. They can do this only if you agree in writing. Nominee companies are covered if an authorised investment firm has accepted responsibility for their losses. If not, we will pay compensation only if the nominee firm is authorised by the Financial Conduct Authority. You can check this by using the FCA's Firm Check service or by phoning the FCA Consumer Helpline on 0800 111 6768.

RetiredInThailand wrote: »

Are these ETFs or regular funds? They have very different fee structures. If I was often buying small amounts I would probably go for regular funds as there is no purchase/sale fee for these with my broker (though they do charge 0.3% annually), and then when I had a fair amount invested in them I would sell them and buy similar ETFs instead.

I'm buying funds and shares but would separate out my share purchase to keep under the £50k compensation limit if it was an issue.

Regarding Crest, I found this:

http://the-international-investor.com/comparison-tables/uk-crest-personal-member-account-comparison-table

It looks like very few brokers provide the service but that aside, if we're saying that a nominee company definitely doesn't trade, then it looks like fraud is the only thing which was result in such an entity becoming insolvent. That being the case I'd probably opt to keep all my eggs in one basket and incur no further charges at all.

P.S. In the days of the £35k FSCS compensation limits I thought I was being smart and split my cash up for added safety. Had I left well alone I would have been completely unaffected when some of the Icelandic debacle happened in 2008.

grey_gym_sock

TCA wrote: »

if we're saying that a nominee company definitely doesn't trade, then it looks like fraud is the only thing which was result in such an entity becoming insolvent.

fraud or gross administrative errors. if they fail to buy the correct number of units, or to transfer cash or units to the correct accounts, etc, they might end up short.

Ainsley1

Just joined in this thread after ChesterDog pointed it out to me.

I had been thinking along the same lines as OP. I think some of the posts have set my mind at ease somewhat on some matters that were of concern.

Whilst my few investments are with a respected FCA regulated and long established broker held a via nominee account, I had been looking at the worst case scenario so I too was wondering about diversity of platform providers. My jury is still out on that aspect!

One other area I have been a little bit concerned about might be loss or corruption of records, given that everything is held electronically and things sometimes do go wrong. (I guess that would be an admin risk?). Although there are paper records sent to me regularly (I do not consider those to be secure either!) they are always, by their nature, out of date.

Banks take a great care with their transactional databases, with numerous backups and recovery systems, and we seem to accept those usually without thought. Nevertheless issues do arise even with the big household names!

Does regulation (or other controls) put a similar liability on the platform providers with respect to electronic record keeping? Perhaps there are other records such as registrars that we have access to (perhaps via FCA) should the worst happen.

Ifts

Write up about this over on the Monevator blog:

http://monevator.com/investor-compensation-scheme/

Ainsley1

Ifts, Thanks for that link. Interesting website, well worth a read.