SVS Securities - shut down?

masonic

Don't underestimate the regulatory hurdles faced by the administrators. The FCA have mentioned potential breach of CASS rules, which could complicate matters and there will no doubt be a requirement to liaise with the FCA throughout the process and get sign-off on some actions. There may be ways in which the process could be accelerated, at greater cost, but the administrators have a duty to all creditors (not just investors who will be repaid by the FSCS) to control costs.

The administrators' proposals, expected towards the end of September, will probably paint a clearer picture as to likely timescales.

pafpcg

manted wrote: »

I also hope they don't have the discretion to use the Execution only clients' assets for distribution to the DFM clients who were mis-sold other Investments.

Sorry, no! They (the adminstrators) don't have the discretion NOT to use the Execution only clients' assets for distribution to the DFM clients who were mis-sold other Investments. We're all clients of SVS Securities and all our assets are pooled and losses apportioned pro rata. That's what would happen if there were no FSCS.

But since FSCS would be covering our losses (up to £85k) it might be administratively simpler (for the administrators and FSCS), if there are no losses in the XO operation, to handover the assets of XO clients as is, then for those clients in other operations within SVS who have lost money, to compensate them individually. (That saves the effort of compensating everyone.) But the approach adopted will be agreed between the administrators and FSCS (and presumably the FSA and the High Court).

Alexland

pafpcg wrote: »

We're all clients of SVS Securities and all our assets are pooled and losses apportioned pro rata.

Not sure about that. If the execution only client assets are correctly segregated from the business assets them it's possible that those customers would eventually get access to all their assets and those that have a claim against the business for poor practice would get a limited payout?

Alex

My2penneth

What would be logical, what would be fair?

Execution only (XO): assuming no shares pilfered then your compo will be to cover admin costs only...the extent of your financial loss.
- Q: what did you invest in...A: shares.
- Q: are they all there? ...A: yes
- what have you lost?....just admin costs to cover LC's work. I'd allow 10% of your portfolio value so you might start losing money if your cash and shares combined exceeds £850k ( eight hundred and fifty thousand).

Of course, if fraudulent activity, then we will need to wait to find the outcome of LC's review.
Personally, I think that when they open the box, the shares will be there and errors will be small.

Just my personal opinion./hope!



Completely Separate.

"Model portfolio "
This is where it will likely be difficult ( ie. nasty ). Hopefully though, a model portfolio will contain a range of asset types of which some will have value. Some of the assets ( bonds) might be poor value..... I think these customers will be in a worse position and will rely on the FSCS more than XO customers.

masonic

There is no simple answer to the above, but there is a process that will be followed, which is unlikely to lead to XO investors assets being used to cross-subsidise costs associated with asset realisations from advisory clients, and there is no scenario under which XO investors assets could be used to fund mis-selling claims by advisory clients.

The administrators will first have recourse to the funding set aside to execute the SVS "living will", assuming SVS had complied with its regulatory requirement to have a living will, and to fund it (the administrators have so far made no reference to this).

For costs associated with asset realisations, the administrator may have some discretion, assuming proper ringfencing and the resolution of the FCA's CASS compliance concerns, but the most likely scenario is that they will apportion costs against the whole body of investors for activities that benefit all investors, and apportion costs associated with realisation of specific assets (such as non-readily realisable securities) against those specific assets. Since it is unlikely that XO investors would have invested in some of the junk peddled by the advisory arm, they would likely be unaffected by problems disposing of said junk and may well receive a distribution and FSCS top-up ahead of advisory clients.

Should there be a confirmed breach of CASS rules, then there is a prescriptive process that should be followed, which depending on the circumstances may result in all of the assets being thrown in one pot and the proceed distributed proportionately to all investors. However, if this unlikely event comes to pass, I suspect it will be subject to legal action in the High Court and nobody can predict the outcome of that (and yes, if someone takes the administrators to court, all investors would be paying for their defence). The FSCS will step in to make up for shortfalls up to their £85k limit.

Mis-selling claims or claims for bad advice (which will end up being decisions from the FOS) would be treated as unsecured creditor claims and would be paid out of SVS business assets (in the likely event there are no residual business assets to pay these claims, they would be paid by the FSCS).

olderbutnowiser

Having just read LC's updated FAQs, I have gained some comfort from the following:


" Once all client positions have been reconciled by the Joint Special Administrations and holdings have been confirmed by the client, information will be provided to clients on how they may transfer their investment or assets to another broker."


That appears to me that LC do not expect to find too much amiss with our XO accounts and that we may even have a choice as to which broker we transfer our portfolios.


Thoughts?

johnburman

You are reading between the lines. We simply don't know what LC will find (or have found and are not telling us).

How do we push LC for some 'comfort' that there is not "much amiss with our XO accounts"?

olderbutnowiser

We don't of course know what they have found but it's the wording that I am gaining some comfort from.


If they were expecting our accounts to have been raided, they would not be wording it that way.


My take (hope) it that SVS were not committing fraud (like Beaufort) but were using client monies inappropriately which fell short of the regulations.

Alexland

olderbutnowiser wrote: »

That appears to me that LC do not expect to find too much amiss with our XO accounts and that we may even have a choice as to which broker we transfer our portfolios.

I would be surprised if it is economical or justifiable for the administrators to operate a process to enable the individual transfer out of accounts. It makes more sense to sell the customer base to another platform who would pay good money to bring those assets under management in the expectation the majority of new customers would stay and pay ongoing fees for years. Once on a new platform you would be able to follow their transfer out process.

Alex

Robster88

olderbutnowiser wrote: »

We don't of course know what they have found but it's the wording that I am gaining some comfort from.


If they were expecting our accounts to have been raided, they would not be wording it that way.


My take (hope) it that SVS were not committing fraud (like Beaufort) but were using client monies inappropriately which fell short of the regulations.

Even with Beaufort, clients received something like 85-90% of their money back, so if this turned out to be similar, you would have to have a lot with SVS for the rest not to be covered by the FSCS.