Protection for share ISAs over £85,000

Eddie__2

Anyone who has invested the max in ISAs for the last 5 years could now be holding more than the FCA-protected amount of £85,000.  If the ISA platform went bust, what is the individual's protection for their excess shares?  I am talking about self-selected equity shares, not funds. I realize that the shares are ring-fenced and held by Trustees of the provider in the beneficial name of the investor.   Does that mean that the FCA would appoint a new provider and the shareholdings would continue to belong to the investor without any problem, except the inability to trade while the transfer took place?  Or is the sensible advice to hold share ISAs above the limit with multiple providers, paying two sets of fees and having more accounts to manage?  In these turbulent times, is that a small price to pay for security, or not necessary and a waste of time and money?

steampowered

Eddie__2 said:

Does that mean that the FCA would appoint a new provider and the shareholdings would continue to belong to the investor without any problem, except the inability to trade while the transfer took place? 

This. You would still own the shares if the platform went bust.

bowlhead99

steampowered said:

Eddie__2 said:

Does that mean that the FCA would appoint a new provider and the shareholdings would continue to belong to the investor without any problem, except the inability to trade while the transfer took place? 

This. You would still own the shares if the platform went bust.

True.

Though if the platform goes bust, it's no longer in business and unable to transfer the holdings to a new provider, so they get the administrators in, who need to be paid, and they can be paid out of client assets. 

If the administration was going to cost a couple of million quid out of 200 million of client assets, then you would lose a percent of your assets if they did it pro rata, and may need to claim £2000 from FSCS for your 1% shortfall on your £200k account. However, FSCS may agree to just pay the administrators direct (as has happened in a couple of high profile broker failures) so that all you suffer is not being able to access your investments for a year. (see relevant huge recent thread on SVS Securities administration). Of course, it's feasible that the costs are not borne pro-rata by everyone. Either way, having accounts with more than one provider could be sensible to ensure a portion of your assets are at least still accessible in such a case of platform/ISA manager failure. If it's a pension that you can't access for a couple of decades anyway, that's much less of a deal than if it were an ISA which you were hoping to cash in next month and buy a car or upgrade your house.

If the reason the platform went bust is because of management perpetrating a big fraud against certain customer accounts, pretending they had bought shares on your behalf and faking the system entries while pocketing the cash, then you don't actually have any shares to be transferred to a new broker, because you're a victim of fraud. In that case, you might need a lot more than the seamless £2000 of compensation in the example above.   But if an ISA manager has billions under management from hundreds of thousands of customers, it's probably unlikely that someone has stolen all your money and left everyone else's alone, so it might still be the case that only a small fraction of your holdings are missing, and even a million pound ISA might not need an FSCS claim of as much as £85k.

Eddie__2

Thanks to both of you for your swift responses, providing some clarity, and also for detailing aspects of a potential FSCS claim.  There I was, in my ignorance, thinking the disruption may be a few weeks!  I also thought that the FSCS covered just the first £85,000 of your assets, not your loss, so in your example, if you had £200,000 and lost £2,000 you would get nothing from them because you still kept £198,000, which is in excess of their £85,000 limit of cover. 
I need to find a reputable low-cost, for low transaction volume, provider for my ISAs.  The only regular transactions I have are DRIP dividends.  Saga have just transferred mine to Eqi by Equiniti, and they count as one.   Any suggestions? 

Albermarle

https://monevator.com/compare-uk-cheapest-online-brokers/