Cheque Error - Wrongly Returned

Robster88

Hello,

This is quite a specific question and I have searched online to see if anybody has had a similar issue, but I haven't been able to find anything so thought I'd ask here.

The company in which I have some shares is undergoing a rights issue, so I had the opportunity to buy some shares at a discounted rate, and sell the nil paid rights for the shares I was entitled to purchase but didn't.

I sent a cheque to my stockbroker to purchase these shares, with the forms detailing how many shares I wanted to purchase, and how many nil paid rights I wanted to sell.

I have checked my bank statement today and have seen that the cheque has been returned un-cashed, and then later received a letter from the bank saying that the cheque had been altered, and was therefore invalid.

I did not alter the cheque, and so it should not have been un-cashed.

Because of this the stockbroker was unable to buy the shares before the rights issue deadline, which means that I have missed out on buying shares at the discounted rate. Because I was not intending to sell the nil paid rights for these shares, as I was going to buy them, it means I will not be able to get any money from the nil paid rights either.

This mistake, which is no fault of my own, will cost me about £10,000 (the difference between the discounted share price and the expected ex rights share price). That is if I had sold the shares straight after the ex rights date - if I held onto them and the share price increased the amount of money I have missed out on will also increase.

I don't believe that this is fair. I feel the stockbroker should have told me straight away (whereas I didn't know until I checked my bank statement). That way I could have potentially sorted the matter out before the deadline.

Is there anything I can do about this? Is the stockbroker liable for not telling me in time? Can I get the cheque returned to me so I can see why they think it was altered?

Many thanks

YorkshireBoy

Presumably you've already filed a formal complaint with your stockbroker?

What did your bank say when you asked them if you could have sight of the returned cheque?

AnotherJoe

The mistake was partly your own fault, you ran close to the deadline and you used a cheque (which means you posted it which gives even more room for delay and errors.

I think the bank is equally at fault as the stockbroker but I'd allocate blame in equal thirds to all three of you. The bank should at least be able to get you an image of your cheque id have thought. Ask them.

Robster88

YorkshireBoy wrote: »

Presumably you've already filed a formal complaint with your stockbroker?

What did your bank say when you asked them if you could have sight of the returned cheque?

The stockbroker says that it is 'being looked into' but I have not raised a formal complaint yet as I only became aware of this today.

I have not yet spoken directly with the bank, I have only had correspondence with them via letter, which I received today. The free time I had today I spent on the phone with the stockbroker, not the bank.

I was asking the question on here to see if anybody had firm information about whether or not there would be any point in raising a formal complaint, and whether there would likely be a positive outcome from doing so.

I am not sure if there is any legal liability on their part because I was not informed, or whether they can argue that they did not need to consult me, and the fault lies with the bank that said the cheque had been altered.

I thought maybe somebody who can been through a similar situation could offer some advice?

MyOnlyPost

Robster88 wrote: »

I did not alter the cheque, and so it should not have been un-cashed.

The bank haven't said that you altered the cheque. You need to see a copy and see if it has been altered since you sent it

Robster88 wrote: »

This mistake, which is no fault of my own, will cost me about £10,000 (the difference between the discounted share price and the expected ex rights share price). That is if I had sold the shares straight after the ex rights date - if I held onto them and the share price increased the amount of money I have missed out on will also increase.

You have assumed there is a mistake but you haven't seen the banks evidence yet. What if the stockbroker altered the cheque because you dated it wrong, filled in the wrong amount or spelled his name wrong? He shouldn't have but that doesn't mean he didn't

Robster88 wrote: »

I don't believe that this is fair. I feel the stockbroker should have told me straight away (whereas I didn't know until I checked my bank statement). That way I could have potentially sorted the matter out before the deadline.

Assuming the stockbroker has banked the cheque, his bank has presented it to your bank and your bank have declined it, what makes you think the stockbroker was aware of this before you? Chances are he received a letter in the post the same day as you

Robster88 wrote: »

Is there anything I can do about this? Is the stockbroker liable for not telling me in time? Can I get the cheque returned to me so I can see why they think it was altered?

As above, there is no guarantee the stockbroker knew before you did. The bank should be able to show you a copy of the cheque so you can check for alterations. As to what you can do

If the checque has been altered then the bank were right to stop it. If the stockbroker altered it then you could argue they are at fault and should have presented it "as is". If the alteration was because of a mistake you made and they corrected then they should have notified you and asked you for alternative payment.

If the cheque hasn't been altered then the bank shouldn't have stopped it and they are in the wrong.

Either way you have to take partial responsibility for leaving it so close to the deadline, paying by cheque and not allowing time for any problems should they arise.

Finally, failing to make a profit is not the same as making a financial loss. You are no worse off today than you were when you sent the cheque. Whilst some form of restitution may be due if there has been incompetence it isn't as cut and dried as if the bank had lost £10,000 of the money in your account

dunstonh

I did not alter the cheque, and so it should not have been un-cashed.

But did anyone else alter it?
Or was there a correction that was not signed?
They often supply a copy of the cheque showing the problem. You havent got one so you need to ask for it?

I feel the stockbroker should have told me straight away (whereas I didn't know until I checked my bank statement). That way I could have potentially sorted the matter out before the deadline.

The stockbroker would get the cheque back about a week later. They will normally tell you then. How close were you to the deadline?

I have experienced, multiple times, where banks have returned cheques for spurious reasons. In each case the bank used it as a marketing excuse to try and sell their own products. However, most banks dont do this and most no longer sell investment products and have no reason to.

It is unlikely the stockbroker has any liability as the rejection is outside of their control. Unless they altered it. An alteration could be a change in the payee name with different handwriting. So, if you used a short name but they added the bit missing, then some banks may not like that and class it as an alteration.

The bank has every right to return a cheque if it has been altered as they say. If it hasnt and the reason was false then you have a very strong complaint reason with them. Although you havent technically suffered a loss. Failure to gain is not the same as actually being out of pocket.

Robster88

Thanks for the replies.

It seems to be the consensus that I am partly at fault for leaving it close to the deadline. The time for which shares could be bought and nil paid rights sold was only two weeks in total, and I sent off the cheque and the forms halfway through that time. This was because it takes a few days to decide how many to buy/sell and get the money together etc. I don't therefore believe that I was particularly cavalier with the timing.

A cheque was sent instead of a transfer because that is what Equiniti ask for. It does seem rather archaic and risky, but like I say, that is what they asked for.

I agree that the stockbroker may not have realised that the cheque had been un-cashed until they received the letter the same day I did, so would not be liable for not having told me sooner.

When I get a copy of the cheque I can see what the alteration is meant to be and can see whether it was altered by the stockbroker, which I think is unlikely, or mistakenly considered altered by the bank.

Whilst I don't think of money in my share account as actual money until they are sold and the money is in my bank (and so losses and gains are rather arbitrary until then) this is more of a loss than just failing to buy the shares.

The value of my shares are now diluted, and so they are worth £10,000 less than they were before the rights issue. I could have sold the nil paid rights and got a cheque for £10,000 just by ticking a box, but I intended to purchase more shares at a discounted price (which would have immediately been worth £10,000 more than I paid for them, as the estimated ex rights price was roughly correct).

I suspect I will just have to chalk up these 'losses', but it is annoying when I sent a perfectly valid cheque (which they requested) in good time (halfway through the available time).

dunstonh

A cheque was sent instead of a transfer because that is what Equiniti ask for. It does seem rather archaic and risky, but like I say, that is what they asked for.

Actually, it is less risky and provides a good audit trail. Bank transfers where one digit difference can see the money go off to someone else carries greater risks.

I agree that the stockbroker may not have realised that the cheque had been un-cashed until they received the letter the same day I did, so would not be liable for not having told me sooner.

You would know before the stockbroker. The letter you got is sent the same time the cheque is returned to their bank. So, when you got the letter, their bank would have got the cheque back. Their bank then sends the cheque back to them in the post. So, there is an extra hop involved for them.

jimjames

Robster88 wrote: »

The value of my shares are now diluted, and so they are worth £10,000 less than they were before the rights issue. I could have sold the nil paid rights and got a cheque for £10,000 just by ticking a box, but I intended to purchase more shares at a discounted price (which would have immediately been worth £10,000 more than I paid for them, as the estimated ex rights price was roughly correct).

What was the default option? Have they applied that in the absence of a correct form? Normally the default is to sell the rights I seem to recall, did that happen?

Robster88

jimjames wrote: »

What was the default option? Have they applied that in the absence of a correct form? Normally the default is to sell the rights I seem to recall, did that happen?

I rang the stockbroker this morning. They are contacting the company to see if it is still possible to buy the shares at the discounted price even though the rights issue is over, and I am apparently not alone in that my cheque was un-cashed, although I do not the know the circumstances of the other people.

They have assured me that as you say the default option was to sell the rights, and so I will receive a cheque for the nil paid rights if I am unable to purchase the discounted shares. They did not tell me that on the phone originally when I spoke yesterday, hence my post.

I was also not sure that this would be the case as I have never let it lapse like this (so to speak) as have always filled in the forms saying how many of my allocated shares I wanted to buy/sell.

I also remembered an old colleague telling me that they once ignored the rights issue letter and so didn't do anything about it and they received nothing because they had not said they wanted to sell the rights. They may well have been mistaken, as that doesn't seem to be the case, although it was a worry.

greenglide

d I am apparently not alone in that my cheque was un-cashed, although I do not the know the circumstances of the other people

So a junior member of staff at the broker has done something stupid when paying in the cheques?

Date stamped the front with the date of receipt or otherwise written on the front instead of the back so that "several" cheques have been rejected?