SVS Securities - shut down?

masonic

RasputinB said:

masonic said:
I thought you were advocating doing the transfer client by client, but it seems you are taking an even more extreme view than me regarding the impracticality of splitting up the client book

A point I tried to make was that it looked like LC decided that their best course of action was to get the whole book transferred and having decided that other options weren't fully discussed.
They didn't help ITI Capital by, in effect, dumping the transfers and by quickly getting rid of SVS staff who had hands on knowledge of the client base. The SVS admin. chap I dealt with appeared to be very unhappy with LC and gave me the impression that they had caused problems (for him and for ITI Capital) by not assisting the transfer processes e.g. sending over a load of certificates when ITI Capital expected electronic transfers.

The decision to get the whole book transferred to a single nominated broker would have been taken by LC in conjunction with the creditors' committee (including FSCS representative) and the FCA. All of these parties have a vested interest in keeping the costs down: LC due to its obligation under insolvency law; the FCA in order to minimise the burden on the FSCS; the creditors' committee to get that part of the administration done as quickly as possible so as to move on to other matters (to the extent the creditors' committee was constituted of creditors rather than clients - I'm not sure how many of the 4 non FSCS members were which). You made some good points about why that decision may have been necessary, but I remain sceptical that it would have been too difficult to separate the asset classes (shares vs derivatives) to perform a bulk transfer of each of those to different brokers. So, as you say, I think some options were not explored or taken off the table too early.

Perhaps you are right about LC not retaining staff with expertise that could have made things run more smoothly. This raises the question where were the FCA at that critical stage to represent clients interests? This is a perfect example of the conflict of interests brought about by the Special Administration Regime wherein such a matter should have been challenged and brought before the judge for a ruling. Perhaps this did happen. Perhaps there was a reason for the course that was taken. Could it have been a consequence of numerous clients being in default of LSE that the electronic route was no longer available? Just speculation as we'll probably never find out. It certainly seems to me that the FCA should have been focused on consumer outcomes and should have had the foresight to push for electronic transfers to be conducted if that was a possibility.

RasputinB said:

Did you not notice that the Distribution Plan included the obligation to handle Reverse Transfers i.e. "individual transfers for each client to a broker of their choice"? Yes, this was not pushed. In fact LC successfully hid the fact from most and actively discouraged clients in taking that course of action.

I was aware the section on Reverse Transfers, and I believe it was discussed here. I've gone back to the distribution plan to refresh my memory, and it is not what you appear to think it is. Clients had the right to demand that their assets, after being transferred to ITI, were "transferred" back to SVS. I put "transferred" in quotes because the assets would continue to be held by ITI and governed by ITI's T&Cs, but effectively LC would act as an agent for the client, the client would have no direct relationship with ITI and could not contact or be contacted by ITI directly. It would be useful only to those who could not or would not register for direct access to their account with ITI.

To me, that would represent the worst of both worlds, as your onward transfer request would now need to be made by your new broker to LC/SVS, who would then need to sub-contract it to ITI. Having a transfer that is contingent on the timely action of both LC and ITI at each stage sounds like a nightmare, and I don't know how you would trade in the interim if you wished to do so, fill out an form and post it to LC who would then have to pass on your instructions to ITI?

Clearly many suffered great difficulties at the hands of ITI, but would it have been any better to leave it to LC to fight to get problems resolved rather than the clients fighting for themselves? I'm doubtful anything would have been made better through the insertion of LC into the chain of intermediaries.

RasputinB

I don't know how useful it is for us to continue to discuss this but I do have personal experience of transferring back to SVS and the perceived difficulties that you touch on, and that LC were keen to exaggerate, evaporated.
You say that "the client would have no direct relationship with ITI". Yes, ITI Capital tried to pull that one but backed down when I referred them to the Conduct of Business Sourcebook's definition of a client.

johnburman

Guys... All very nice discussing history for a terrible period for almost all of the 21000 clients of svs. They lost access to their investments and then had to deal with ITI who had a complex super difficult IT platform that was almost unusable. Then transfer out of ITI to someone more sensible then make a claim on the FOS..

Such fun 

But how are we going to hold the FCA to account IF it is the FCA 's fault (and they will say it is iti)

PS I missed out the' excitement 'of seeing how the FSCS would cover the losses suffered. Not forgetting the Meeting at CHURCH HOUSE Westminster when they would not say who would not be covered. 

masonic

RasputinB said:

I don't know how useful it is for us to continue to discuss this but I do have personal experience of transferring back to SVS and the perceived difficulties that you touch on, and that LC were keen to exaggerate, evaporated.

That would put a very different complexion on the situation, if LC were able to deal with ITI without the same issues plaguing customers who set up individual accounts in good faith, then that isn't treating customers fairly. Though I do wonder if the situation would have been the same had a larger proportion of clients elected to transfer back to SVS. There can be no question that the transfer of assets out of ITI via LC would involve more work overall than a transfer direct from custodian to custodian. Do you think your assets were transferred onward to a broker of your choice before others who entered into a direct agreement with ITI? Prioritised ahead of ITI's direct clients? Perhaps this has been covered somewhere in the 630 pages of this thread.

RasputinB said:

You say that "the client would have no direct relationship with ITI". Yes, ITI Capital tried to pull that one but backed down when I referred them to the Conduct of Business Sourcebook's definition of a client.

I did not mean to imply that the client would have no avenue of complaint if ITI was responsible for unsatisfactory outcomes. Merely that LC would be acting as your agent, and would need to serve as an intermediary for any communication or transactions, based on the terms of the agreement that would be entered into. This would limit ITI from holding and processing personal information of the client, which some may object to. My assumption was that LC would be terrible at this job (e.g. poor at communication, and slow to act), but if you've had a positive experience, maybe I'm being too hard on them.

johnburman said:
But how are we going to hold the FCA to account IF it is the FCA 's fault (and they will say it is iti)

Holding the FCA to account is extremely challenging, as I have found out in relation to another matter. I have an ongoing complaint with the Complaints Commissioner from December 2018, which keeps being deferred (due to a criminal investigation, followed by a prosecution related to my issue). I have also complained to my MP, and the Treasury Select Committee who oversee the FCA. While my issue has been raised and discussed in Parliament, and positive noises were made, nothing has yet been done. I can only hope that the legal matters conclude this year and my complaint can then be investigated. I still hold out some hope of success.

The same path could be followed by anyone who can make a case that there was wrongdoing by the FCA.

RasputinB

masonic said:
Do you think your assets were transferred onward to a broker of your choice before others who entered into a direct agreement with ITI?

Maybe it will be easier if I give my story, at least as I remember it.

I thought that a “Reverse Transfer” was the obvious way to go and posted such on this forum. I held back because of the negativity created by LC and the fact that it appeared that nobody else was going for it.

Foolishly I’d gone through the complete on-boarding process with ITI Capital and my account was set up with them so I became aware of the serious problems and security issues with their in-house systems. I’d also worked out (as had others) that the Phoenix platform was actually with Interactive Brokers.

I had a couple of holdings that I’d been wanting to sell so I did that through ITI by phone. No issues placing the trades (as I think I mentioned on this forum) but the admin was very poor and getting contract notes a challenge. In the end LC got them to me.

When I instructed LC that I wanted a Reverse Transfer I was given more negativity but proceeded. I don’t remember needing to do any ID verification with SVS admin but, of course, all was done with my new broker; Interactive Brokers (IBKR).

Worth remembering that a lot of transfer work needs to be done by the client. Including finding a broker (or brokers) that will take the holdings and all the verifications. The transfer is then initiated from the broker. So the SVS admin team (one part time person) had very little to do on my case but I had the complexities of dealing with IBKR. If there had been hundreds or thousands of Reverse Transfers then those on the ball would have been given priority simply by being in the queue earlier. I’d have thought that LC / SVS would also have been able to set up a panel of receiving stockbrokers who were willing to have dedicated staff and streamlined procedures. These could be selected by us clients on a voting basis if fairness needed to be seen?

I think I put on the forum how quickly my main transfers were made; it was about two weeks. LC were OK with communications and willing to phone me. The SVS chap was hampered by the fact that he no longer had an office but was quick enough with emails.

Needless to say it wasn’t that simple. One of my holdings turned out to be in certificate format. It was a FTSE 350 company so very surprising to me that it was not held electronically. I think it had been a company spin off and SVS had never got around to dematerialising.

But SVS and LC did appear to pull together and get ITI on the case. I also chased ITI directly with vigour. There was a serious delay with this particular transfer but I’d have expected that with any stockbroker. My feeling is that LC had caused a problem by not dealing with these whilst at SVS, or if not able to do that, by failing to assist ITI (maybe they’d already ascertained that ITI were hopeless). No doubt there were many more shareholdings which were still in certificates and bogged down any transfers out from ITI.

My greater potential problem was with the shares (of little value) that IBKR would not accept. If I remember rightly I just dealt with LC for these as they had proceeded to close down the SVS admin. From my end it was a matter of instructing LC that I wanted certificates and then a fair bit of progress chasing. The certificates arrived in due course and were, of course, at no cost to me. Registrars often have a backlog dealing with issuing certificates and I can’t remember feeling that the time to get the certificates was excessive. I’d have considered writing them off if it wasn’t for the fact that they still had potential value to me for tax losses.

This last point I think is important because I suspect that thousands of SVS clients weren’t too bothered about getting their few low value holdings back. 20,000 clients demanding exit would have been, as you say, a huge problem. But there would have been natural prioritisation as some would have quickly complied with documentation requests and many of the others would not have bothered. Didn’t ITI say that thousands of clients hadn’t responded?

The whole transfer process in the UK is a shambles and whilst attempts appear to have been made to address the issues the FCA are way behind. I regularly transfer US stock holdings between brokers and this is almost as easy, and almost as quick, as a BACS cash transfer between UK banks; and at no cost to me.

With the Special Administration complications, the transfer process problems and the regulatory issues it is hardly surprising that experienced and established stockbrokers would not be interested in taking on a book such as that of SVS. So I agree that splitting the book would have been a good strategy. But I still maintain that the obvious assets of systems, staff and records at SVS were for the most part wasted. They were, in fact, available for those who Reverse Transferred; 43 of us.

masonic

RasputinB said:

masonic said:
Do you think your assets were transferred onward to a broker of your choice before others who entered into a direct agreement with ITI?

Maybe it will be easier if I give my story, at least as I remember it.

Thanks for the very detailed summary. I still find it baffling that, even after onboarding clients, ITI would not be in possession of all information relevant to client holdings.

RasputinB said:

Worth remembering that a lot of transfer work needs to be done by the client. Including finding a broker (or brokers) that will take the holdings and all the verifications. The transfer is then initiated from the broker. So the SVS admin team (one part time person) had very little to do on my case but I had the complexities of dealing with IBKR. If there had been hundreds or thousands of Reverse Transfers then those on the ball would have been given priority simply by being in the queue earlier. I’d have thought that LC / SVS would also have been able to set up a panel of receiving stockbrokers who were willing to have dedicated staff and streamlined procedures. These could be selected by us clients on a voting basis if fairness needed to be seen?

Interesting that you decided to transfer to IBKR, when ITI was already using the IBKR platform. ITI has its own nominee company, so it looks like they have just white-labelled the front end, otherwise it could have been very easy for you if the assets were already held by IBKR and it was effectively an internal transfer.

As I'm sure you're aware, a normal stock transfer does not involve the client doing a lot of the work. This is normally done by the brokers involved. As such, the reverse transfer method would probably not be palatable to the vast majority of clients, especially the non-responsive types you highlight. I think your willingness to roll up your sleeves and do whatever was necessary was what made this work for you.

Your comment regarding LC setting up a panel of receiving stockbrokers was exactly what I had in mind when I suggested that more than one nominated broker could have been chosen. In the Beaufort administration, clients ended up with three different options if I recall correctly. One was brought online initially, and clients invited to apply to be transferred there, but those who were unhappy with this choice only had to wait a couple of months for the second option to become available.

However, I think the real problem here was the decision process that led to ITI being chosen. I remember when the terms of business were released in redacted form, and I used them to identify ITI as the proposed nominated broker for the first time, over a month before LC disclosed who it was - I had never heard of ITI before that point and neither had anyone else. How could such an obscure company, that had appeared to muddle along in relative obscurity for years, be able to cope with a sudden influx of 20,000 new clients and an asset book that had known deficiencies? Well, now we know.

RasputinB said:

My greater potential problem was with the shares (of little value) that IBKR would not accept. If I remember rightly I just dealt with LC for these as they had proceeded to close down the SVS admin. From my end it was a matter of instructing LC that I wanted certificates and then a fair bit of progress chasing. The certificates arrived in due course and were, of course, at no cost to me. Registrars often have a backlog dealing with issuing certificates and I can’t remember feeling that the time to get the certificates was excessive. I’d have considered writing them off if it wasn’t for the fact that they still had potential value to me for tax losses.

This last point I think is important because I suspect that thousands of SVS clients weren’t too bothered about getting their few low value holdings back. 20,000 clients demanding exit would have been, as you say, a huge problem. But there would have been natural prioritisation as some would have quickly complied with documentation requests and many of the others would not have bothered. Didn’t ITI say that thousands of clients hadn’t responded?

The issue of how to handle non-transferable securities is a tricky one. In some Special Administrations, the broker would maintain its authorisations and ability to manage investments. Was there a failure to protect the wider infrastructure early on, which lead to SVS being suspended as a member of LSE when a number of trades did not settle, and some clients ended up in default of LSE? Was it just the fact that the books didn't balance and that a lengthy reconciliation exercise was required, at which point it was easier to chuck it over the fence to ITI?

For those who have onboarded at ITI, they will still have any remaining holdings there, and perhaps you are right that they will be left there and forgotten.

RasputinB said:

The whole transfer process in the UK is a shambles and whilst attempts appear to have been made to address the issues the FCA are way behind. I regularly transfer US stock holdings between brokers and this is almost as easy, and almost as quick, as a BACS cash transfer between UK banks; and at no cost to me.

I completely agree with you on this point. My last in specie transfer took about 4 months to complete. When you look at the work that has been done over the years on the electronic transfer of cash ISAs, investments have really been left behind. It's completely in line with the FCA's published outcomes that barriers to switching providers should be removed as far as possible. They have focused on encouraging firms to reduce fees, but I'd suggest the hassle and timescales involved are just as off-putting.

eskbanker

johnburman said:

If we must can we post stuff to help ex SVS and ex iti clients. And make sure the get the compensation they are entitled to

Obviously those with skin in the game have the most to gain from posts that share helpful information like that (although it's diminishing returns 2/3 years on), but there's nothing preventing others from making civil on-topic contributions about how this situation arose, the broader regulatory/legal situation, etc - it's a discussion forum, not a support group as such!

masonic

eskbanker said:

johnburman said:

If we must can we post stuff to help ex SVS and ex iti clients. And make sure the get the compensation they are entitled to

Obviously those with skin in the game have the most to gain from posts that share helpful information like that (although it's diminishing returns 2/3 years on), but there's nothing preventing others from making civil on-topic contributions about how this situation arose, the broader regulatory/legal situation, etc - it's a discussion forum, not a support group as such!

Agreed, but it would be a mistake to view those other contributions as not helpful to those embroiled in the situation. In the beginning, all anyone could do was discuss in general terms, and there is clear evidence that this helped a number of posters navigate a difficult situation. As the situation unfolded, discussions in general terms were able to put the matter at hand into context, help to make sense of the difficulties people were experiencing, and manage expectations. Towards the end, there was a clear moneysaving opportunity in communicating the virtues of free and low cost (FOS, moneyclaim) routes to redress, rather than engaging barristers as some had been discussing (and of course how to get the best out of these services). I suppose no good deed goes unpunished, and some want a sympathetic ear rather than dispassionate counsel and practical advice. It is actually a credit to this forum that several posters were willing to give freely of their time to try to assist others in need, read documents, mine the FOS decisions database etc, even though they had no skin in the game.

And now events have largely drawn to a close, it is useful for any of us to learn as much as possible about what happened so that we can be better prepared in the future.

Emillion1

Sheris said:

eskbanker

The FCA and LC was after the highest bidder in terms of monies, with no respect to the clients of SVS.
No homework or detail into ITI past history, should have accepted a lower bidder with a history for the transfer.
Incompetent is a understatement for the FCA and LC with unprofessional common sense what was always going to be the outcome.            

There was another bidder who wanted to keep the same technologies in place which would have been merely a paperwork exercise for the clients. 

Emillion1

masonic said:

pafpcg said:

From my recollection, subsequent to the publication of the FAQ document, there was discussion in this forum thread in which someone claimed that LC had revealed that one of the three final bidders had been vetoed by the FCA because of the involvement of one of the ex-directors of SVS.  It's entirely possible that LC were selecting a bidder from a list of only one!

Yes, it was my recollection that ITI won by default, and I thought the one that pulled out did so when they'd been whittled down to the final two (i.e. after the veto). Regarding that final paragraph, the FCA must formally approve the choice of broker, as must the creditors' committee. To suggest they weren't integral to the decision process is absurd.

I'm not sure this is correct, I think the deal was already agreed beforehand. The bidding process was a bit of a sham.  My understanding is that there had been conversations between Directors of SVS and ITI prior to the administration.  It could also be possible that there were other influences.  Would love to see the administrators report into the conduct of the Directors of SVS, sadly these remain confidential.