CMC Invest FSCS protected or not?

Powapa

Hello,

I have recently switched out of T212 Cash Isa to CMC Invest Cash Isa for the better rate. I went through the "This Is Money" website to open the account who state "It leans on the FSCS cover of NatWest and Qualifying Money Market Funds to protect customer deposits in its Isa up to £85,000 if it goes bust."

When looking on the MSE website they state that FSCS can't 100% confirm that the money in CMC invest will be protected.

I'm a little confused on what to do as This Is Money say they only advertise savings rates fully protected by FSCS. 

wmb194

Powapa said:

Hello,

I have recently switched out of T212 Cash Isa to CMC Invest Cash Isa for the better rate. I went through the "This Is Money" website to open the account who state "It leans on the FSCS cover of NatWest and Qualifying Money Market Funds to protect customer deposits in its Isa up to £85,000 if it goes bust."

When looking on the MSE website they state that FSCS can't 100% confirm that the money in CMC invest will be protected.

I'm a little confused on what to do as This Is Money say they only advertise savings rates fully protected by FSCS. 

Have a look at this recent thread, link below, re the same topic and Trading212. Deposits and investments (for fraud and maladministration) with stockbrokers are covered by CASS rules and the FSCS but it's more roundabout than with banks, BS' and credit unions. 

CMC Markets (LSE:CMCX) is a profitable, established FTSE250 company so personally I wouldn't worry about it failing anytime soon but even if it did all your (and my) deposits and QMMFs with should it be segregated from its own assets.

https://forums.moneysavingexpert.com/discussion/6587246/trading-212-what-do-we-think

https://www.londonstockexchange.com/news-article/CMCX/final-results/17070525

masonic

If CMC Invest goes bust, then you are covered (though the only payout required should be towards administrator fees, since they shouldn't be holding any of your money). If a QMMF loses money, then you are not, because that would be regarded as investment risk.

wmb194

masonic said:

If CMC Invest goes bust, then you are covered (though the only payout required should be towards administrator fees, since they shouldn't be holding any of your money). If a QMMF loses money, then you are not, because that would be regarded as investment risk.

Yes. What I like about T212 is that it shows the QMMFs you’re invested in and it looks like it’s expanded the range of funds it uses, it used to be only four. I wish CMC and IG would do the same.

Powapa

masonic said:

If CMC Invest goes bust, then you are covered (though the only payout required should be towards administrator fees, since they shouldn't be holding any of your money). If a QMMF loses money, then you are not, because that would be regarded as investment risk.

So if these QMMF's went bust I wouldn't be covered under the FSCS protection? I wonder why "ThisIsMoney" advertise it as fully FSCS protected then. 

I understand the risk is super low but still a risk right?

masonic

Powapa said:

masonic said:

If CMC Invest goes bust, then you are covered (though the only payout required should be towards administrator fees, since they shouldn't be holding any of your money). If a QMMF loses money, then you are not, because that would be regarded as investment risk.

So if these QMMF's went bust I wouldn't be covered under the FSCS protection? I wonder why "ThisIsMoney" advertise it as fully FSCS protected then. 

I understand the risk is super low but still a risk right?

If the company running the QMMF went bust, then the QMMF would still be holding investments and you'd get back whatever those investments could be sold for. That could result in a loss. You'd still have FSCS protection against fraud or administrator fees, but not any investment losses. The QMMF could also lose money while the company running it remains solvent, in which case this is also a loss you would have to incur.

Yes, these are very low risk investments, like government bonds, but there is no guarantee QMMFs will always go up in value, and could at times lose value.

ThisIsMoney is correct to say the investment is fully FSCS protected, because that is how FSCS protection for investments works. The Vanguard Global All Cap Index Fund is also fully FSCS protected, but that doesn't mean you aren't at risk of substantial losses if there is a stockmarket crash. But in this case, the investment risk is very low. It is not the same as having FSCS protection for cash deposits, where there is no investment risk. Really, a distinction should be made between FSCS protection for savings vs investments. MSE does make this distinction and refers to the CMC product as a "non-standard cash ISA".