x-o new terms; unreasonable?

EdGasketTheSecond

From what I can make out of their 'new terms' it looks like thay can hang on to your uninvested cash for around 3 months. That doesn't seem quite 'kosher' i.e. if they are using it at all, it should be in an instant access account. What if the market takes a dive and we all decide to sell up and want our cash?


Do other brokers have anything as draconian?



"

In particular I would draw your attention to Clauses 6.3 and 6.4 as these are material changes to our terms of business. They read as follows:

6.3 Account Money may be held in a designated client bank account which may restrict withdrawals for up to 95 days. We maintain a client money policy which states the maximum amounts that are placed in such accounts, the reasons for using such accounts and the risks of doing so. As per our client money policy, we will ensure that at least 10% of the total client money pool is held outside these unbreakable term deposits (i.e. immediately available, or available within 30 days).

All client money is held with institutions that meet our risk management parameters – these parameters include credit ratings, capital requirements and whether deposits held are protected by government schemes (such as the Financial Services Compensation Scheme (FSCS) in the UK).

6.4 You agree that we will not be obliged to treat monies as Client Money in respect of a delivery versus payment transaction through a Commercial Settlement system if it is intended that:

i) in respect of a purchase of investments by you, money from you will be due to us within one Business Day upon fulfilment of the delivery obligation; and

ii) in respect of a sale of investments by you, money is due to you within one Business Day following fulfilment of the delivery obligation, unless in either case the payment or delivery has not occurred by the close of business on the third Business Day following the date on which payment or delivery was due."

Shedman

Yes I'd like some clarification on what those 'new' terms actually mean as well. Like Ed my initial thoughts were that they sounded unreasonable, but maybe need to read the whole terms and conditions to get the context plus see the definitions of Account Money and Client Money.

Wouldn't be happy if they really can hold on to the cash for 95 days but I'm not sure that is the case. However, if it really is the case then my and the wife's ISAs will be leaving them for pastures new.

EdGasketTheSecond

The complete terms are quite easy to find on google:


www.x-o.co.uk/wp-content/uploads/XO-Standard-Terms-and-Conditions.pdf



The entire 'Monies Held' section from 2010 Terms was simply:


"5 Monies Held
5.1 Account money accepted by us will be segregated from our other monies and
held in a designated client bank account with HSBC Bank plc or with any
other authorised institution that we may from time to time nominate.
5.2 Account money committed for investment will be debited to the Account at the
time of a Transaction and may be transferred to a designated client money
settlement account. Interest shall accrue for our benefit pending settlement."


which seems much more acceptable.

Reaper

Yes I was unhappy with the email too. If their 10% float gets used up does that mean we might also have to wait 95 days to buy shares from our remaining cash?

Tears_of_Jenny

Reaper wrote: »

Yes I was unhappy with the email too. If their 10% float gets used up does that mean we might also have to wait 95 days to buy shares from our remaining cash?

Exactly this.

How is this even workable?
Is it really the case that 90% of the people with cash in their accounts just leave it there without withdrawing/investing it?

And is the money truly "pooled"? So if 10% of people have withdrawn using up all of the instant cash and I deposit some further funds ready to invest, can these funds be used for other clients?

fun4everyone

Tears_of_Jenny wrote: »

Is it really the case that 90% of the people with cash in their accounts just leave it there without withdrawing/investing it?

Being completely honest, I tend to leave cash from dividend payments in there building up until I have enough to invest.

I'm not sure about these changes either - although I do still trust them. The 2010 terms were far more acceptable.

I guess the prudent way to operate an account on there now would be to never hold a cash balance.

Reaper

I have emailed them to say I am unhappy and to clarify how it will work.

If they have run out of cash and I sell a bunch of investments so I can switch to something else the chances are I will be unable to re-buy because I will be only one of many fighting for the newly created pool of cash.

Reaper

X-O replied very promptly:

There are no changes to the day to day running of your account and all proceeds from sales and funds on the account can be withdrawn or invested as normal.

The terms and conditions email we have sent is to make sure clients are aware of our amendments to these sections due to updated regulatory changes by the FCA.

In the unlikely event that Jarvis Investment Management Ltd goes into liquidation, the updated T&C’s advise that it may take up to 95 days to withdraw the funds from various banks we use to protect clients funds. This has always been the case and is standard across all other brokers, however we felt we needed to be more transparent and updated the terms and conditions accordingly.

So it sounds like there is nothing to worry about. Wish they had said that in the first place!

EdGasketTheSecond

Yes however the clause in 6.3 does not say 'in the event of x-o's liquidation' does it? The bare statements mean they have a 10% float and if that is used up you might have to wait 95 days; what else can it mean?



Must admit I am not totally happy; if it was in a liquidation only scenario, why doesn't it say that? In any dispute it will be what's in the terms not what's in emails.

jamei305

Details of the regulatory change here: https://www.fca.org.uk/publication/policy/ps18-02.pdf

"A few respondents were concerned that the written explanation may unnecessarily alarm clients"

2.24 - 2.27 for liquidity details - basically it's highly regulated and firms will have to use their own cash to pay clients in the short term if necessary