What stops provider retrospectively choosing a favourable transaction date when cashing-in?

SonOf

and days later I'm retrospectively notified that the sale happened right in that dip, but how do I know it really did?
From your contract notes and transaction details on the platform.

What are the protections against the Trust using hindsight to choose the lowest date, saying that's when the sale happened, but actually providing the cash out of float, say, and pocketing the difference?
What float?  
What you are suggesting is illegal and could easily be spotted within audit trails. It would also need third parties to be involved making it a widespread fraud involving multiple companies and individuals.  It would also need a crystal ball  And again, we point out that the platform has nothing to gain.  It is not their money.  They dont gain or lose whether you sell on one day or the other.

There must be some protection against front-running like this, surely.
Common sense.
Also, odd that their portal was still showing my full holding 3 days after the supposed sale; perhaps that's just admin lag but it seems poor.
It is not odd at all.   Settlement period on funds is usually T+2 or T+3.   If your platform is not prefunding (which the budget platforms rarely do) then the money from the funds does not turn up until 2 or 3 days later.

rforsixpence

SonOf, thanks for helping me get my head around this. The fraudulent scenario would be that the Pension Administrators instruct the Fund Manager to sell my holding on Wed, and this raised £1m. On Friday, they look back at the week and notice the fund prices were 10% down on Monday compared with Wed. So they tell me my sale happened on Monday and raised £900k. They transfer £900k to my new provider, and pocket £100k. No third party collaboration. No crystal ball needed. No risk. Apologies if this is over-simplistic but I am nowhere near an expert! 

You mentioned contract notes. Maybe I need to check the date on these (if/when they are posted to me), assuming they cannot be falsified (am I paranoid or what?!). I recently transferred a much smaller pension pot and didn't get any paperwork other than a statement basically saying your assets were sold for £X, goodbye!

SonOf

The fraudulent scenario would be that the Pension Administrators instruct the Fund Manager to sell my holding on Wed, and this raised £1m. On Friday, they look back at the week and notice the fund prices were 10% down on Monday compared with Wed. So they tell me my sale happened on Monday and raised £900k. They transfer £900k to my new provider, and pocket £100k. No third party collaboration. No crystal ball needed. No risk. Apologies if this is over-simplistic but I am nowhere near an expert! 
The problem you have with that scenario is that the instruction will be logged as being received at a given date/time.    So, that would need to be changed fraudulently.  If you have online access to documents (as many platforms do) the dates would show on that.  And any edit to those dates/times would show as edited with old/new value and who changed it.
if they used the Origo options system, the dates and replies are date/time stamped.

The systems are largely automated once the transaction to sell is keyed.  Again, an audit trail exists and many platforms show you the audit trail details.    The details cannot be changed once keyed as the transaction data is generated external to the platform.  So, editing that information would require the ability to hack, not only into the platform front end but also the platform back end (which is usually a third party provider).  It would also need contract notes to be manually changed.   

The platform itself doesnt receive the money until the settlement day.  So, a fraudster would have to be able to access the platform's bank account and make changes there.   And all these things would need to be done without anyone noticing them and bypassing internal systems and controls and anti-fraud measures.      

For a platform do that on a commercial basis would be suicide.  For the directors, management etc, it would be jail terms as this is not misselling but wholesale fraud. And yes, it would need third party collaboration as so much of the data involves third parties (fund house, origo, platform software provider etc)  and you can check audit trails whenever you like.  

If you are picking budget providers that have limited data on buys/sells/switches and you are concerned about this, then maybe you should switch to be a platform with better transparency.     After all, there is more to platform selection than price alone.

Andrew31

Clearly nothing untoward here, just unlucky.  Some you win some you lose.  Basically, you should have timed it better.  You say it was at there own pace, but you could have instructed a sale to cash when markets where soaring (most advisers probably would have done this)  Hope you get some of the recovery.  #deadcatbounce

Notepad_Phil

rforsixpence said:

Thanks for all the replies, much appreciated. It is reassuring to hear that others have sometimes profited while being out of the market.

I didn't have as much as you to transfer across and unfortunately in your case it is too late to do anything now, but in my case I did a similar transfer in multiple stages. Of course I could have been very unlucky and found that every transfer lost money, but I figured that doing it in multiple stages gave me a better chance that I wouldn't lose out too much to an upward movement whilst out of the market.

This did of course mean that it took a lot longer to get everything transferred out, but I felt it was worth it.

rforsixpence

That seems good advice, Notepad_Phil. With hindsight, that's what I would be recommending to anyone in my situation. I don't know if it's possible to request that a transfer is done in multiple stages; certainly my providers did not advertise it as a service. As a second best, I suppose there's nothing to stop one "switching to cash fund" in chunks over a few weeks leading up to the transfer. Switches are free (in my case, anyway) and it removes the risk of being caught out by a short-term price movement, even if you are "out of the market" for longer.

Novice_investor101

I sold down my Stocks & shares ISA before I requested a transfer out of Fidelity. When I bought the same funds with my new provider it was nearly 3 weeks later.During the 3 weeks, the price had risen to more than I'd sold at, then dropped to less just as I was buying in again. Nothing nefarious going on, just pot luck. 

Notepad_Phil

rforsixpence said:

That seems good advice, Notepad_Phil. With hindsight, that's what I would be recommending to anyone in my situation. I don't know if it's possible to request that a transfer is done in multiple stages; certainly my providers did not advertise it as a service. As a second best, I suppose there's nothing to stop one "switching to cash fund" in chunks over a few weeks leading up to the transfer. Switches are free (in my case, anyway) and it removes the risk of being caught out by a short-term price movement, even if you are "out of the market" for longer.

Luckily my original provider had no problems with it but I had to do a bit of investigation to find a new provider that had transfer forms that I could easily use to request partial transfers - luckily I quickly found that Alliance Trust Savings would do this and they were not far off being the cheapest for me so I actually stayed with them long term as I quite liked the platform. Unfortunately they sold all of their non-adviser sipps to ii last year so people can't use them in the way I did anymore.

Regarding the "switching to cash funds", unfortunately I think if the market does an upward spike then you'll be more at risk that you'll end up with transferred cash that can buy fewer funds then they would have originally done. 

I guess you could then wait for a downward turn before investing the money, but I'm a fan of investing the money ASAP as I'm not going to second guess the market.

jim1999

The answer here is that brokers are required to follow the principles of "Best Execution" which have existed for a while.  You'll see policies / reports depending on your broker, e.g. HL: https://www.hl.co.uk/shares/quality-of-execution-report

MIFID II strengthened the protections in this area.  Furthermore, the FCA has broader protections under the "Treating Customers Fairly" banner.

In essence, the requirements in this area are very clear, and many of the loopholes that used to exist have been closed.  If a firm was to actively ignore these requirements, they would find themselves paying significant amounts of compensation and under extreme pressure from the FCA.  The records of the transactions that they provided to the regulators would demonstrate that they were not following best execution.

rforsixpence

Jim1999, that's reassuring, but do you know how I can check. I've asked my provider for the "contract notes" but they say they are unable to provide them. Is that compliant with "best execution" and the other protections you reference?