Beaufort Securities

Malthusian

Alibert wrote: »

I don't think this is a problem of bad ring fencing. The big point of interest here is that administrators are allowed to access client money to pay administration costs (following a judgement in Lehman case)

What's the alternative? A DIY administration? Pile up all the client assets in the middle of a wrestling ring and share them out via battle royale?

Somebody has to get to the bottom of what belongs to which investor and they need to be paid one way or another.

This cost will already be absorbed by the wider financial industry to a great extent, due to FSCS protection. Thanks to the FSCS, the only people who stand to lose anything are those who took on enough risk that their share of the administration costs will amount to more than £50,000.

And a lot of Beaufort clients will lose nothing as their money was already stolen by third parties months ago.

If nobody was allowed to take fees from the client assets to put Beaufort into administration, then nobody would do the job. The only alternative outcome is that Beaufort would eventually be dissolved and each investor would have to individually go to the courts to prove that their assets beneficially belonged to them and have the shares transferred into their direct ownership. Which would cost every individual investor an absolute bomb and would not be covered by the FSCS. Quite sensibly, that isn't on the table.

tg99

dunstonh wrote: »

They did have some conventional shares in their spread and it is those assets which are easily realisable that saw PWC lower its estimate on the likely losses. Its the unusual illiquid assets that the losses are going to be on.

Yeah my point was that some investors may have invested with Beaufort in standard type share portfolios, e.g. the blue chips mentioned, and thus not have been aware of the additional risk they were exposing themselves too given this was a FCA regulated broker. That said, I am not aware of the business model used by Beaufort - was it all discretionary management (and hence the reason the investor quoted in the article I mentioned was in blue chips was because he indicated he was on the low risk end of the equity risk spectrum)? Or did they also provide execution only services like the more mainstream brokers?

Alibert

The big issue to come out of Beaufort , the one that will affect lots of people is the realisation that properly segrated, clearly identified, client money is available to pay administration costs.

tg99

Malthusian wrote: »

What's the alternative? A DIY administration? Pile up all the client assets in the middle of a wrestling ring and share them out via battle royale?

Somebody has to get to the bottom of what belongs to which investor and they need to be paid one way or another.

This cost will already be absorbed by the wider financial industry to a great extent, due to FSCS protection. Thanks to the FSCS, the only people who stand to lose anything are those who took on enough risk that their share of the administration costs will amount to more than £50,000.

And a lot of Beaufort clients will lose nothing as their money was already stolen by third parties months ago.

If nobody was allowed to take fees from the client assets to put Beaufort into administration, then nobody would do the job. The only alternative outcome is that Beaufort would eventually be dissolved and each investor would have to individually go to the courts to prove that their assets beneficially belonged to them and have the shares transferred into their direct ownership. Which would cost every individual investor an absolute bomb and would not be covered by the FSCS. Quite sensibly, that isn't on the table.

Yep someone has to pay the costs of the administration as you say. There is talk of perhaps an insurance scheme being introduced in the future to avoid investor assets being used to pay these costs though this would I guess inevitably lead to the costs of such a scheme being passed through to investors via higher charges.

Alibert

Does FSCS protectiin cover administration fees ?

tg99

Alibert wrote: »

Does FSCS protectiin cover administration fees ?

If you have made a loss of up to £50k due to administrator fees being taken from your assets then you would be fully covered under the FSCS scheme. Any portion above £50k would not be covered. You would though need to have a pretty sizeable portfolio before your loss exceeded £50k due to fees. (I think it was estimated by PwC that investors with Beaufort would only experience a loss once their portfolio size exceeded c£150k but it may be higher than that now as PwC have since reduced their estimate of what the overall fees will be.)

nrsql

Wonder if they will look at how many and what sort of people will lose out, consider the public impression and how much they can make otherwise and set their fees accordingly.
Of course they could be working as efficiently and cheaply as possible with the interests of clients as their main concern.

North4

Alibert wrote: »

The big issue to come out of Beaufort , the one that will affect lots of people is the realisation that properly segrated, clearly identified, client money is available to pay administration costs.

That's what's concerning. Are you saying that even if you stick to low risk, quoted securities yourself, you are, in effect assuming a share of the risks that other investors with that broker might be carrying?

Col_Jessop

More spin coming from the usual suspects. A very disingenuous attempt to colour the victims of Beaufort as being in some way responsible for their own losses. That is clearly not the case. When the USA are progressing criminal cases it is pretty clear who the fault lies with here. Add to that that the FCA knew about the criminal behaviour and kept Beaufort trading and completely ignored their responsibility to the UK citizens that utilised the services of a regulated firm.

Much of Beaufort's investors will be people that took advantage of the Royal Mail offer. They were pitched as a broker for that. Hardly, a back street bookies in terms of how they were marketed / regulated.

Many were recommended Beaufort by IFAs. These look to be the victims of Beaufort and the FCA that will be hit hardest. Again, using the Nominee system and combined with the FCA and PwClocking people out of their accounts. These poor souls have no idea what level of losses they will incur. They will be significant. They are certainly not at fault, just as someone opening an online trading account with a regulated broker is to blame for the losses being incurred. The blame lies squarely with the FCA. Why is there still no criminal investigation by UK police, when there are criminal charges in the USA?


There are also attempts to portray Beaufort as exceptional. That is not the case. The nominee system is prevalent across the broker industry. Investors are no better protected irrespective of the size of the firm they deal with. Anyone currently invested with a UK broker is at the same risk of losses that the victims of Beaufort and the FCA are incurring. To claim they are not is disingenuous.


Note that the FCA claimed that the risk in Sept 17 was for DMF clients only. Other Beaufort customers were not believed to be impacted by the investigation - despite the measures against Beaufort at the time having an impact. We were lied to about this being an issue with the online trading system, which would be resolved by an upgrade to the system signed of by the FCA. This was blatant lies.

Lungboy

Nobody has been found guilty of anything criminal yet, so you're rather preempting the court case.