Pound cost averaging investments

EdGasketTheSecond

masonic wrote: »

The answer to the question is that FSCS cover applies if there is a failure in ring-fencing and the investments you were told you had were not there.

Can you direct me to where the FSCS say they will cover failure of a nominee company because as far as I am aware they don't cover that scenario?


See here:
https://www.telegraph.co.uk/finance/personalfinance/investing/isas/11485311/Is-my-300000-safe-if-my-Isa-broker-goes-bust.html


"With cash, the FSCS offers protection of £85,000." Note: 'Cash'

Malthusian

EdGasketTheSecond wrote: »

Can you direct me to where the FSCS say they will cover failure of a nominee company because as far as I am aware they don't cover that scenario?

See here:
https://www.telegraph.co.uk/finance/personalfinance/investing/isas/11485311/Is-my-300000-safe-if-my-Isa-broker-goes-bust.html

That article doesn't say anywhere that nominee companies are not covered by the FSCS. It merely says "the FSCS shouldn't apply because your investments would be ring-fenced" and doesn't discuss what would happen if your investments weren't ring-fenced due to fraud or incompetence.

Holding investments as a nominee company is protected investment business and the FSCS would apply if the company failed to ringfence your investments correctly and owed you money as a result. See Beaufort. (Slightly different scenario but the important point is that the FSCS paid out when investors lost money that was supposedly ringfenced - in this case because it was required to cover the costs of the administration.)

EdGasketTheSecond

In Beaufort's case the FSCS is/has arranged transfer of assets to a new broker. Not the same as compensation although they did help sort things out and claim customers should not lose out. I don't think a collapse of a nominee with total loss of customer data / Nominee fraud has been tested as far as FSCS compensation is concerned.

But I maintain the FSCS compensation is strictly for cash with a collapsed platform NOT for the invested money in shares, bonds or whatever though in Beaufort's case they assisted recovery of customer's holdings.

Malthusian

EdGasketTheSecond wrote: »

In Beaufort's case the FSCS is/has arranged transfer of assets to a new broker. Not the same as compensation although they did help sort things out and claim customers should not lose out. I don't think a collapse of a nominee with total loss of customer data / Nominee fraud has been tested as far as FSCS compensation is concerned.

If my nominee broker steals £10,000 in cash from my account, then goes into liquidation when the fraud is discovered, the FSCS will pay me £10,000.

If my nominee broker steals £10,000 worth of shares in Acme plc from my account, then goes into liquidation when the fraud is discovered, the FSCS will still pay me £10,000.

Either way the broker in default owes me £10,000 to make good its theft and it relates to protected investment business which is covered by the FSCS. What exactly it stole to give rise to its liability to me is not relevant.

EdGasketTheSecond

Malthusian wrote: »

I
If my nominee broker steals £10,000 worth of shares in Acme plc from my account, then goes into liquidation when the fraud is discovered, the FSCS will still pay me £10,000.

I don't think so.
The FSCS will recover your shares if they can be identified. I do not think they will pay you the cash equivalent if the shares cannot be identified. You would have to take a pro-rata hit on the number of shares recovered against what you believed you held along with all other shareholders.
As said previously, show me the FSCS statement that says investments in a nominee account are covered by FSCS protection? You can't because they are not covered. It would be too much risk for the FSCS to cover.
UPDATE: It looks like there may be FSCS cover but limited to £50,000 not £85,000

Malthusian

EdGasketTheSecond wrote: »

The FSCS will recover your shares if they can be identified.

The broker didn't steal them so they could admire the gilt edging on the certificate. They sold them and pocketed the cash and the shares are gone. The FSCS will pay me £10,000 or whatever the value of my loss is. The FSCS isn't going to fanny around buying shares for me. If I want to buy the shares back with my compensation I can do it myself.

I do not think they will pay you the cash equivalent if the shares cannot be identified. You would have to take a pro-rata hit on the number of shares recovered against what you believed you held along with all other shareholders.

No I wouldn't. The debt owed to me by the firm in default in respect of protected investment business is £10,000 which is within the compensation limit.

As said previously, show me the FSCS statement that says investments in a nominee account are covered by FSCS protection? You can't because they are not covered. It would be too much risk for the FSCS to cover.

The risk of brokers stealing from nominee accounts is minimal. If you own a broker and want to extract some cash out of your customers, it would be much more lucrative to just sell the business. This would likely give you more money in your pocket than dipping into the clients' accounts, and you wouldn't be on the run.

UPDATE: It looks like there may be FSCS cover but limited to £50,000 not £85,000

So I gather from that I don't need to point out the relevant page of the COMP handbook to you. I never said anything about the compensation limits.

The compensation limit for investment business is going up to £85,000 this year from 1 April.

masonic

I don't think there is anything to indicate the OP thought that anything other than the now £50k (soon £85k) FSCS limit for investments applied to his S&S ISA.