What does the FSCS £85k compensation cover for Sharedealing ISAs?

scg1889

Hi,
I have a question (well, questions 😉) about how the FSCS £85k cover works with sharedealing accounts. So I have a sharedealing account with a UK bank and have Stocks and Shares ISAs for the following 1) Shares 2) OEIC Funds 3) Investment Trust Shares. So in the first place if the UK bank I have a sharedealing account folded would anything actually be ‘lost’ ie would I still hold the shares/funds but I’d just need to get a different ISA provider, or if everything was lost would I be covered up to £85k?
Regarding the different types of investments I have:
1) Shares. In the case of the companies I hold direct shares in going under – that’s fine understand that’s all gone
2) For OEIC funds if for example Jupiter, AXA go under a) would the underlying shares they hold still be associated with me and nothing lost or b) if lost, are the Fund companies covered by the FSCS guarantee or c) would I be able to claim against UK bank my sharedealing account is with?
3) Investment Trusts. Again I suppose same questions as with OIEC above
 Appreciate there’s a bit there but if anyone can just answer part of it, that’s a start 😊

Albermarle

The investment accounts are covered for £85K , basically in case of fraud . That is you send them money to buy shares and they run off with it .
Each fund house , eg Jupiter are covered for £85K 
Shares ( so including IT's ) are not covered.
Overall the likelihood of this compensation to be necessary if you stick to mainstream providers is about zero .

Linton

As you say, FSCS wont cover you against poor performance of investments.  Also you are correct to say that the investments in any OEICs/UTs are yours and not available for use by the fund management company or the platform to plug holes in its accounts.

It is very difficult to come up with realistic scenarios where FSCS cover would be important if you are investing in mainstream nvestments on a mainstream platform.  If you choose to invest in dubious investments on a platform that enables you to do this perhaps the situation may be different.

The best anyone has come up with I think is massive fraud.  So for example if some rogue employee in HL was able to syphon off your cash but ensure that the computer systems still reported the numbers you expected.  And then this fraud would have to be on such a scale that HL would be unable to recompense you.  The same would apply to fund managers.  If you believe this is conceivable in a UK regulated company then I guess the FSCS cover would be important to you.

ctdctd

I think the coverage also applies to uninvested cash with the platform - so if you'd sold and were waiting for a market dip to reinvest, the cash would be covered up to the FSCS limit if the platform went bust.

Another_Saver

And you're still the ultimate beneficial owner of whatever you own so even if the platform and fund (if applicable) house go bust, there will be a paper trail somewhere that the fund owned what it owned and you owned the fund. Ownership does not stop when the medium through which ownership is managed ceases to exist.

ctdctd

Another_Saver said:

And you're still the ultimate beneficial owner of whatever you own so even if the platform and fund (if applicable) house go bust, there will be a paper trail somewhere that the fund owned what it owned and you owned the fund. Ownership does not stop when the medium through which ownership is managed ceases to exist.

'Paper trail' - that's so 1990's! 

As demonstrated by one of the bust P2P platforms, it all goes tits up if someone wipes the computer! 

Linton

ctdctd said:

I think the coverage also applies to uninvested cash with the platform - so if you'd sold and were waiting for a market dip to reinvest, the cash would be covered up to the FSCS limit if the platform went bust.

I think you will find that just like shares and OEICs. the cash is held separately from the platform company and so should not be affected if that company went bust.

For example HL say:
All client money is held by us on trust and is segregated from our own funds in accordance with the FCA’s client money rules and guidance so that any creditors of Hargreaves Lansdown would have no legal right to it and we cannot use any of this money to cover Hargreaves Lansdown's obligations.

[Deleted User]

With regards to OEICs - if they are Irish (like Lindsell) they are not covered by the UK scheme but by the Irish scheme, which only pays out to a max of 20k euros.

caper7

@scg1889 thank you for laying out the exact question I've been meaning to ask!
And thank you all for the clear replies 👍

scg1889

ctdctd said:

I think the coverage also applies to uninvested cash with the platform - so if you'd sold and were waiting for a market dip to reinvest, the cash would be covered up to the FSCS limit if the platform went bust.

Thanks that was one of the other questions I meant to ask!

scg1889

Albermarle said:

The investment accounts are covered for £85K , basically in case of fraud . That is you send them money to buy shares and they run off with it .
Each fund house , eg Jupiter are covered for £85K 
Shares ( so including IT's ) are not covered.
Overall the likelihood of this compensation to be necessary if you stick to mainstream providers is about zero .

Thanks. I thought it was in case the banks went bust and something that had been put in place (or bolstered) since the Financial Crises in 2008? The FSCS site states "If your bank or building society fails and can’t pay back your money"