what protection do you have in share ISA's

happyhero

Hi I have a couple of share ISA's with shares and funds in them with Hargreaves Lansdown and I know with Building Societies etc, you have £85,000 protection but what sort of protection do you have with companies like Hargreaves Lansdown (HL)who act as Investment Managers?

I am guessing you want some protection for any cash you hold with them between trades but I am am also guessing that if they went bankrupt that shares and funds monies are actually in the companies I'm invested in (and not in HL).... ...or at least in the case of the shares but not sure if it is different with the funds, can anyone clear this up for me please so that I know what is protected and for how much etc?

Any help appreciated.

westy22

A comprehensive discussion on this very matter is currently on Monevator.com

http://monevator.com/

happyhero

westy22 wrote: »

A comprehensive discussion on this very matter is currently on Monevator.com

http://monevator.com/

Cheers westy22 for that, its very helpful, but complicated to be sure about each bit. But I'll ask a couple more questions if that's ok, and sorry if I am being dumb here as I struggled to get this information clearly from the article,

where generally should I expect that my money is if invested in a UK company, lets say M&S for example, ie is it in M&S or in my brokers hands?

and second question the same but with a UK Fund, lets say one of the Schroders funds, is the money held by my broker or past on to Schroders?

and if with Schroders, is that out of the brokers hands if the broker goes bust?

westy22

happyhero wrote: »

where generally should I expect that my money is if invested in a UK company, lets say M&S for example, ie is it in M&S or in my brokers hands??

It is complicated.

M&S will have never heard your name - as far as they are concerned the shares are all owned by HL Nominees.

and second question the same but with a UK Fund, lets say one of the Schroders funds, is the money held by my broker or past on to Schroders? and if with Schroders, is that out of the brokers hands if the broker goes bust?

Same answer as above - Schroders have never heard of you.

These are all 'Nominee' accounts which means that (in your case) - everything is owned by HL Nominees and only HL's records will show you as the beneficial owner. However, the HL Nominees company is ring fenced from HL itself and so if HL goes bust the creditors cannot touch HL Nominees. HL Nominees itself cannot go bust - it does not trade and only ever has assets which exactly match its liabilities - it is self-balancing.

Your risk of losing your share or fund holdings really only comes from fraud or embezzlement within HL itself - which is extremely unlikely as it would need joint criminal enterprise between many people and organizations to achieve such a fraud.

Your biggest risk (again a tiny risk with a reputable broker) is uninvested cash held within a broker's account - that is subject to FSCS protection limits.

westy22

As an additional point - if you want to have your ISA investments directly held in your name by the fund managers then you have to have your ISA directly with them i.e. Schroders, F&C etc. But then if you hold your ISA directly with a fund manager then you can normally only have their funds etc within it.

jimjames

westy22 wrote: »

Your biggest risk (again a tiny risk with a reputable broker) is uninvested cash held within a broker's account - that is subject to FSCS protection limits.

Probably the biggest risk is actually the investments not performing or dropping in value. Fraud is so far down the list of worries that it isn't something I'd be concerned about.

grizzly1911

Discussed here too.

https://forums.moneysavingexpert.com/discussion/4833031