Mandatory Redemption of HSBC ETF: my rights?

Voyager2002

Until recently I held an HSBC ETF in my ISA called HMFE. It was listed in London and obviously traded in pounds sterling.

This security recently underwent a "mandatory redemption", meaning that trading stopped and eventually I received a cash sum. I was not given any information nor allowed to make any choices. Eventually some money was credited to my account. I am unhappy that the payment was made in US dollars, and since my ISA can only hold funds in sterling my platform (Interactive Investor) converted it into sterling, charging a fairly hefty conversion fee.

I am obviously unhappy about the lack of information. I do strongly feel that since my holding was denominated in sterling, HSBC should have made the redemption payment in sterling or at least offered some options about the currency and account for this payment.

So, if I complain to them, how do I contact them and do I have a leg to stand on?

masonic

Presumably HSBC MSCI EM Far East ETF - https://www.justetf.com/uk/etf-profile.html?isin=IE00B5LP3W10#overview
Was there no RNS announcement about the closure or corporate action? I agree it does seem odd they used the base currency rather than trading currency to redeem. I don't think you'll get anywhere with a complaint, but you could try. If you have an old prospectus or annual report, it will probably contain contact details.

wmb194

Voyager2002 said:

Until recently I held an HSBC ETF in my ISA called HMFE. It was listed in London and obviously traded in pounds sterling.

This security recently underwent a "mandatory redemption", meaning that trading stopped and eventually I received a cash sum. I was not given any information nor allowed to make any choices. Eventually some money was credited to my account. I am unhappy that the payment was made in US dollars, and since my ISA can only hold funds in sterling my platform (Interactive Investor) converted it into sterling, charging a fairly hefty conversion fee.

I am obviously unhappy about the lack of information. I do strongly feel that since my holding was denominated in sterling, HSBC should have made the redemption payment in sterling or at least offered some options about the currency and account for this payment.

So, if I complain to them, how do I contact them and do I have a leg to stand on?

Okay, to be clear, this was the HSBC MSCI EM Far East UCITS ETF (HMFE). The article linked below refers to its asset size in USD so I suspect that this was the functional currency it used, "HSBC AM directors have the discretion to redeem all shares and terminate a fund if its net asset value falls below $50m. At the time of writing, HMFE has assets under management (AUM) of $23m."

The same as normal companies, announcements for ETFs are made via RNS and its up to investors to monitor them. The problem is that the likes of HSBC, iShares and others will lump announcements for multiple ETFs into one announcement and make them extremely hard to find. Perhaps this is why your broker didn't inform you? If you have grounds for compliant it will be with II, but no doubt its account small print will absolve it of any responsibility.

If you can the prospectus it probably explains what will happen on redemption but I think you'll have to forget it.

https://www.etfstream.com/news/hsbc-am-to-delist-far-east-etf-as-enthusiasm-for-geographic-products-wanes/

murmeltier

There was an RNS announcement (https://www.investegate.co.uk/article.aspx?id=202206060700086600N)

Presumably the underlying currency of the fund itself was USD and I assume you were holding a cross-listing priced in GBP and listed on the LSE.

Redemptions typically occur in the base currency of the fund, i.e. USD in your case which is why your shares were redeemed against USD (which your broker then converted for you into GBP, presumably this bit will be covered by your broker's T&Cs).

Maybe Interactive Investor could have made you aware of the RNS announcement, but I'm not sure they are obliged to do so.

noh

As your holding was in a noiminee account with Interactive Investor it is them you should be speaking with. You should have received a notice of a corprate action from them.
Here is a link to a copy of the announcement. https://www.investegate.co.uk/article.aspx?id=202206060700086600N

Note the paragraph
"Investors buying and selling Shares through a broker or market maker/Authorised Participant and/or investors who hold Shares through a nominee and/or clearing agent, may not appear in the Company's register of Shareholders. Such investors should deal directly with the relevant broker, market maker/Authorised Participant, nominee or clearing agent (as relevant) in respect to their investment."

masonic

murmeltier said:

There was an RNS announcement (https://www.investegate.co.uk/article.aspx?id=202206060700086600N)

So, plenty of notice to trade out of the fund in GBP in advance of the delisting.

EthicsGradient

Worth finding the prospectus; for a Lyxor ETF I hold, it too has a size (50m Euros) below which they're allowed to wind a subclass up (or offer conversion to another subclass in the ETF - which might have been preferable. For anyone holding it outside a tax-free wrapper, that would be likely to be better than a forced conversion to cash and possible capital gains computation).

Lyxor say "The Company shall serve a notice to the Shareholders of the relevant Sub-Fund or Class of Shares in writing prior to the effective date for such Compulsory Redemption, which will indicate the reasons for, and the procedure of, the redemption operations", but don't say if there's a minimum notice they'd use, so that may not be much use. But that would, I think, mean your platform should have done its best to inform you (even if you have no choice about what happens, at least it gives you a chance to plan alternative investment, look at CGT implications and so on).

I can find figures for the current size of ETFs; does anyone know anywhere past figures are maintained, so you can check if there's a tendency to shrink?