SVS Securities - shut down?

masonic

RasputinB said:

masonic said:

RasputinB said:

When my assets were with ITI there was a mysterious change in the currency status for one or two holdings which was rectified when they went to new custodians. The information in this decision suggests to me that, at the time of the transfer from SVS, some assets reverted to default currencies. I don't know why this would have happened but think it might have been due to the transfer process. With these WisdomTree holdings they might have been transferred in a block as JE00B1VS3333 when if they had been transferred as client holdings under ticker PHSP etc. they would have been more likely to retain the currency version.
In an ideal situation ITI would have clarified with each holder.

When a customer is engaged in an arranged in specie transfer to a different provider, these issues are normally communicated up front. Sometimes a holding must be submitted for a conversion to a different class of the same instrument in order to be held at the gaining platform. It is not that the customer can choose, but they could decline the transfer entirely. In this case the customer would not be at liberty to decline the transfer of their account, but I agree with you that being informed of the change is a reasonable expectation, if indeed such a change happened.

RasputinB said:

For those of us without an associated USD account I think it would have been pretty obvious that we would expect any dividends etc. to be in GBP.
Those resident in the UK might suffer added complications due to having to convert to GBP for their tax returns.
Irrespective of whether or not ITI were at fault for transfers coming to them in a way that lost the currency status they should have flagged up the issue and advised any affected clients accordingly.

The trading currency of the ETF is irrelevant when it comes to the payment of dividends. Dividends are normally distributed in the base currency of the ETF, which for PHSP is USD. At SVS, these would have been converted to GBP by SVS (with some forex conversion charge) before being paid to the investor's account. If Mr J is asserting that the holding is PHAG just because he is now receiving dividends in USD, then that is an erroneous inference. He is now receiving dividends in USD because ITI permit this to happen without an enforced currency conversion, whereas SVS did not.

My apologies if I have confused matters. eskbanker asked me if was basing my opinion solely on the use of the ticker symbol and I explained that a couple of my assets had a changed currency status. It was this that resulted in dividends not being received in the expected currency. I've not yet got up to speed on this but so far my research suggests that where there is an option for dividends to be paid in a different currency an instruction is evergreen. For example if you hold Hikma Pharmaceuticals Plc (Ticker HIK.L) the default currency for dividends is in USD. You can elect to have dividends paid in GBP and once that election has been made the registrar will only change it at the shareholder’s request. See https://www.hikma.com/media/2090/181023-dividend-faqs.pdf

It follows that holders of Hikma at SVS who had chosen to receive their dividends in GBP should still have received them in GBP after transfer. If “ownership” had changed then they might have reverted to the default currency of USD but SVS (LC) and / or ITI should have advised if this is what happened.

In my case there was a shortfall in expected dividends and I am still waiting for ITI to explain. It might be because the dividends were received in USD and converted by them to GBP. If so this should be clear from accurate account statements; which ITI haven’t yet provided.

An individual company share will probably differ in that respect vs an exchange traded fund. In that case such an arrangement could be lost in the process of a re-registration to a new nominee and would need to be resubmitted. At the shareholder register level, shares held by a nominee are fungible, so could not be tracked to a specific beneficial owner. I would not be at all surprised if information like this is routinely lost when assets are transferred between nominees in bulk. It would be easier to keep track for an individual in specie account transfer. Whether LC should have been experienced enough to have anticipated that and send out a general warning to clients I don't know.

I do not think this would be applicable to Mr J's ETF holding, however. I'm not aware of the major fund houses making such arrangements with individual shareholders. They will receive their income from underlying holdings and keep it in their cash account of a specific currency ready to distribute at the appropriate time. The choice of currency will often be made based on the currency in which the majority of the income is received, so as to minimise forex costs.

In any case, it seems I'm half asleep, otherwise I'd have noticed a little sooner that a silver ETC is not going to be making any distributions!

RasputinB

Recently added to Ombudsman decisions (financial-ombudsman.org.uk)
DRN-3325384 - £350 D&I payment. ITI offered £200

johnburman

Well done RasputinB. This is an important decision from the ombudsman on the damages awarded for pure inconvenience and where there is no pecuniary loss, only frustration and inconvenience 

£350 is still small. It's worth iti and other FS companies not improving their services when they screw up as the costs of improving will be far less than the comp they need to offer 

But £350 is now the standard on the facts and that is the baseline figure to be asked for

eskbanker

johnburman said:

But £350 is now the standard on the facts and that is the baseline figure to be asked for

Not sure that a single ombudsman decision immediately becomes a de facto standard or baseline, but it is difficult to see anything within this case that differentiates it from those where the slightly smaller figures have been awarded, given the fairly generic nature of the explanation, which presumably aligns with the experiences of most:

£350 (this includes ITI’s original offer of £200 and is not in addition to it) for the distress and inconvenience caused by:

o The delay in transferring her portfolio;

o The delays in transferring her cash to her bank account. 

o Other service issues including some correspondence not being replied to by ITI; and 

o Being unable to trade. 

Note also that this is another case where the ombudsman declined to increase the compensation proposed by the FOS adjudicator (which ITI had accepted), so Ms T presumably spent time and effort in the hope that she'd get more but ultimately didn't....

johnburman

All points well made but this decision is higher than the previous £250 and so yes of course it should be mentioned by other claimants with the same facts

Pecuniary losses need to be added to the 300 GBP for inconvenience 

RasputinB

eskbanker said:

johnburman said:

But £350 is now the standard on the facts and that is the baseline figure to be asked for

Not sure that a single ombudsman decision immediately becomes a de facto standard or baseline, but it is difficult to see anything within this case that differentiates it from those where the slightly smaller figures have been awarded, given the fairly generic nature of the explanation, which presumably aligns with the experiences of most:

£350 (this includes ITI’s original offer of £200 and is not in addition to it) for the distress and inconvenience caused by:

o The delay in transferring her portfolio;

o The delays in transferring her cash to her bank account. 

o Other service issues including some correspondence not being replied to by ITI; and 

o Being unable to trade. 

Note also that this is another case where the ombudsman declined to increase the compensation proposed by the FOS adjudicator (which ITI had accepted), so Ms T presumably spent time and effort in the hope that she'd get more but ultimately didn't....

We don’t know the scale of Ms T’s problems but (thanks to her escalating her case) we do now know that the FOS ombudsman agreed that there was distress and inconvenience caused.

It surely follows that if any ITI client suffered delays and / or service issues they would have a legitimate complaint?

As there were many thousand transfers from SVS to ITI and well-documented issues I think it safe to conclude that many clients experienced problems that would warrant raising complaints?

If I remember correctly you have pointed out that very few complaints have been reported by ITI as if there were more than 50 they would feature in the FOS statistics.

Surely this mean that ITI are extremely likely to be in breach of the FCA rules / guidance for dealing with complaints?

See DISP 1.3.6 where it is stipulated that a firm should consider contacting potentially disadvantaged clients who have not complained and ensure that those customers are given appropriate redress. In this context the FCA also refers to Principle 6 (Customers' interests).

eskbanker

RasputinB said:

eskbanker said:

johnburman said:

But £350 is now the standard on the facts and that is the baseline figure to be asked for

Not sure that a single ombudsman decision immediately becomes a de facto standard or baseline, but it is difficult to see anything within this case that differentiates it from those where the slightly smaller figures have been awarded, given the fairly generic nature of the explanation, which presumably aligns with the experiences of most:

£350 (this includes ITI’s original offer of £200 and is not in addition to it) for the distress and inconvenience caused by:

o The delay in transferring her portfolio;

o The delays in transferring her cash to her bank account. 

o Other service issues including some correspondence not being replied to by ITI; and 

o Being unable to trade. 

Note also that this is another case where the ombudsman declined to increase the compensation proposed by the FOS adjudicator (which ITI had accepted), so Ms T presumably spent time and effort in the hope that she'd get more but ultimately didn't....

We don’t know the scale of Ms T’s problems but (thanks to her escalating her case) we do now know that the FOS ombudsman agreed that there was distress and inconvenience caused.

Indeed, but that doesn't seem to be news, in the context of previous published decisions (and adjudications reported on here) - has there been any evidence of D&I claims being rejected?

It surely follows that if any ITI client suffered delays and / or service issues they would have a legitimate complaint?

Agreed, although the above comment obviously applies, i.e. that we don't know the scale of others' problems.

As there were many thousand transfers from SVS to ITI and well-documented issues I think it safe to conclude that many clients experienced problems that would warrant raising complaints?

Seems likely, yes.

If I remember correctly you have pointed out that very few complaints have been reported by ITI as if there were more than 50 they would feature in the FOS statistics.

Yes, although whether that's caused by few complaints being made or few being reported is a potentially significant distinction!

Surely this mean that ITI are extremely likely to be in breach of the FCA rules / guidance for dealing with complaints?

See DISP 1.3.6 where it is stipulated that a firm should consider contacting potentially disadvantaged clients who have not complained and ensure that those customers are given appropriate redress. In this context the FCA also refers to Principle 6 (Customers' interests).

I guess it comes down to the FCA's interpretation of what's relevant and significant enough to trigger that - as I recall, TSB made proactive redress offers to non-complainants after their well-publicised system fiasco a few years ago and I think there have been various credit card providers (e.g. Barclaycard?) who've contacted customers after inappropriate lending decisions, but there have been many other high-profile problems where banks have essentially expected affected customers to contact them.

However, if the FCA considered that every institution providing poor service during the pandemic should be expected to contact all of its customers and offer redress for distress and inconvenience, then that would have some far-reaching ramifications!

I presume that much comes down to how the FCA interpret DISP 1.3.6's "recurring or systemic problems", as FOS seem to be swayed by ITI's argument that their issues arose from specific IT system problems - the FCA did seem to buy into this in October 2020:

"This is a consequence of IT system failings and errors which ITI has been working to resolve.

"We have held regular discussions with ITI on how it has sought to address these outstanding issues and delays as soon as possible, including responding appropriately to clients and taking steps to ensure they do not suffer financial detriment as a consequence of ITI’s actions.

"As a result of these discussions, ITI has taken a number of steps to improve its ability to provide the services its clients expect, but we recognise that further progress is still required."

The spokesperson said the FCA was keeping the situation with ITI Capital under "close review". 

I don't know how much can be read into their reference to "responding appropriately to clients", as opposed to proactively contacting them, or if the subsequent FCA enforcement action against ITI explicitly mentioned these issues?

Comments inline above....

RasputinB

eskbanker said:

RasputinB said:

eskbanker said:

johnburman said:

But £350 is now the standard on the facts and that is the baseline figure to be asked for

Not sure that a single ombudsman decision immediately becomes a de facto standard or baseline, but it is difficult to see anything within this case that differentiates it from those where the slightly smaller figures have been awarded, given the fairly generic nature of the explanation, which presumably aligns with the experiences of most:

£350 (this includes ITI’s original offer of £200 and is not in addition to it) for the distress and inconvenience caused by:

o The delay in transferring her portfolio;

o The delays in transferring her cash to her bank account. 

o Other service issues including some correspondence not being replied to by ITI; and 

o Being unable to trade. 

Note also that this is another case where the ombudsman declined to increase the compensation proposed by the FOS adjudicator (which ITI had accepted), so Ms T presumably spent time and effort in the hope that she'd get more but ultimately didn't....

We don’t know the scale of Ms T’s problems but (thanks to her escalating her case) we do now know that the FOS ombudsman agreed that there was distress and inconvenience caused.

Indeed, but that doesn't seem to be news, in the context of previous published decisions (and adjudications reported on here) - has there been any evidence of D&I claims being rejected?

It surely follows that if any ITI client suffered delays and / or service issues they would have a legitimate complaint?

Agreed, although the above comment obviously applies, i.e. that we don't know the scale of others' problems.

As there were many thousand transfers from SVS to ITI and well-documented issues I think it safe to conclude that many clients experienced problems that would warrant raising complaints?

Seems likely, yes.

If I remember correctly you have pointed out that very few complaints have been reported by ITI as if there were more than 50 they would feature in the FOS statistics.

Yes, although whether that's caused by few complaints being made or few being reported is a potentially significant distinction!

Surely this mean that ITI are extremely likely to be in breach of the FCA rules / guidance for dealing with complaints?

See DISP 1.3.6 where it is stipulated that a firm should consider contacting potentially disadvantaged clients who have not complained and ensure that those customers are given appropriate redress. In this context the FCA also refers to Principle 6 (Customers' interests).

I guess it comes down to the FCA's interpretation of what's relevant and significant enough to trigger that - as I recall, TSB made proactive redress offers to non-complainants after their well-publicised system fiasco a few years ago and I think there have been various credit card providers (e.g. Barclaycard?) who've contacted customers after inappropriate lending decisions, but there have been many other high-profile problems where banks have essentially expected affected customers to contact them.

However, if the FCA considered that every institution providing poor service during the pandemic should be expected to contact all of its customers and offer redress for distress and inconvenience, then that would have some far-reaching ramifications!

I presume that much comes down to how the FCA interpret DISP 1.3.6's "recurring or systemic problems", as FOS seem to be swayed by ITI's argument that their issues arose from specific IT system problems - the FCA did seem to buy into this in October 2020:

"This is a consequence of IT system failings and errors which ITI has been working to resolve.

"We have held regular discussions with ITI on how it has sought to address these outstanding issues and delays as soon as possible, including responding appropriately to clients and taking steps to ensure they do not suffer financial detriment as a consequence of ITI’s actions.

"As a result of these discussions, ITI has taken a number of steps to improve its ability to provide the services its clients expect, but we recognise that further progress is still required."

The spokesperson said the FCA was keeping the situation with ITI Capital under "close review". 

I don't know how much can be read into their reference to "responding appropriately to clients", as opposed to proactively contacting them, or if the subsequent FCA enforcement action against ITI explicitly mentioned these issues?

Comments inline above....

Thanks to your comments and DRN-3112315 (an earlier decision) I think I can explain how problems arose for most of the ex-SVS clients.

“ITI Phoenix” is actually an Interactive Brokers account with a portal labelled ITI Phoenix. As I am a client of Interactive Brokers I can see what happens when positions are transferred in.

These can be done manually, which is a long tedious process, or they can be imported using a CSV file. The complete database of the transfers from SVS is in the public domain and from that we can see that the holdings are identified by their ISIN. This is a 12-digit alphanumeric code that uniquely identifies a specific security. But it does NOT identify the currency type of the security.

If you try to import electronically and the Interactive Brokers system needs more information then the importation will stop. If done manually the system will list the exchanges on which the security is traded and the correct exchange can be chosen.

In the case of DRN-3112315 I suspect that the default exchange was used and the client became puzzled as they thought they held in GBP but in order to perform the import it was flipped it to USD (or that was the default). ITI said that is how the security came over from SVS but I do not think that is anything like the full story. Maybe enough to bamboozle the FOS ombudsman in one isolated case but when you look at the bigger picture, i.e. the whole SVS database, I think that the problems become obvious.

I believe that ITI expected to be able to import the SVS client’s holdings into “their” Phoenix platform electronically. But the underlying system with Interactive Brokers wouldn’t be able to accept the majority of the portfolios without further information. Chances are that ITI realised that not all imports would go smoothly and had their old Russian system, QORT, as a backup. Those of us unfortunate enough to have had holdings on the QORT system know how totally inadequate that system was even for simple portfolios so it is easy to understand how it would have become overwhelmed.

In ITI’s defence they can point out that they are regulated by the FCA and that the FCA agreed to the transfer from SVS to them. It would appear to me that the FCA’s oversight was inadequate and therefore the FCA is implicated in the transfer problems.

That may explain why they appear to have taken little regulatory action apart from persuading ITI to continue to not take on new clients. This has been since 16 Dec 2020 and may tie in with your comment that “the FCA did seem to buy into this in October 2020”.

My argument will be that the specific IT system problems, as explained above, would have been anticipated by any competent stockbroker, and by the FCA's representative. It was ITI's own in-house system that had recurring systematic problems and was not fit for purpose. (Maybe an existing ITI client can confirm that it has been replaced recently?)

RasputinB

Recently added to Ombudsman decisions (financial-ombudsman.org.uk)
DRN-3454178 - £150 D&I payment. ITI offered £75

eskbanker

RasputinB said:

Thanks to your comments and DRN-3112315 (an earlier decision) I think I can explain how problems arose for most of the ex-SVS clients.

[explanation]

Your theory about the underlying technical issue sounds plausible!

RasputinB said:

In ITI’s defence they can point out that they are regulated by the FCA and that the FCA agreed to the transfer from SVS to them. It would appear to me that the FCA’s oversight was inadequate and therefore the FCA is implicated in the transfer problems.

That may explain why they appear to have taken little regulatory action apart from persuading ITI to continue to not take on new clients. This has been since 16 Dec 2020 and may tie in with your comment that “the FCA did seem to buy into this in October 2020”.

My argument will be that the specific IT system problems, as explained above, would have been anticipated by any competent stockbroker, and by the FCA's representative.

Personally I'm not convinced that there's some sort of collusion between the FCA and ITI if that's what you're suggesting - if ITI had been operating adequately prior to the SVS debacle then it's easier to see the transfer-related technical issues with hindsight rather than in advance, so I think it's a stretch to suggest that the FCA are implicated as such - there's obviously no dispute that they authorised the transfer, but it seems far from a given that they should have spotted the system compatibility issue if that was the root cause.

My comment about October 2020 was intended only to illustrate that the FCA seemed to accept that the delays were caused by technical issues as opposed to, say, inadequate resourcing or process weaknesses, i.e. they didn't see the problem(s) as systemic.

RasputinB said:

It was ITI's own in-house system that had recurring systematic problems and was not fit for purpose. (Maybe an existing ITI client can confirm that it has been replaced recently?)

If your point here is to try to make a case to the FCA that under DISP 1.3.6 ITI should proactively contact and compensate customers, then IMHO it would be worth focusing on the actual wording of that clause, in that it refers to "recurring or systemic problems", not 'systematic' ones.  I'd interpret 'recurring' to mean something that happens multiple times, e.g. every month or every time an account is opened, etc, rather than one that lasts a while, and 'systemic' effectively means embedded in processes rather than relating to systems in the technology sense, so an IT problem leading to widespread delays wouldn't necessarily meet the threshold.

Perhaps also worth noting that DISP 1.3.6 is still caveatted with all sorts of ifs and buts ("consider whether it is fair and reasonable for the firm to undertake proactively a redress or remediation exercise, which may include contacting customers who have not complained") rather there being an absolute obligation to act.


Anyway, I should maybe clarify again that I'm not defending ITI or the FCA here but simply offering alternative interpretations - it'll be interesting to see what happens if you go to the FCA, but do you have anything else in mind if they live down to your expectations and insist that no further action is needed?