collapse of Beaufort - how is it different to investment platforms we use

justme111
justme111 Posts: 3,508 Forumite
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The question may be silly as I don't know much about the topic of investments and legislation.
If a broker Beaufort securities went into administration and the money invested through them can be used for admin fees what is to stop the same happening with any platform we use?
http://m.citywire.co.uk/money/sharesoc-blasts-pwcs-incredible-100m-beaufort-fee/a1117484?ref=citywire-money-latest-news-list
The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
Often people seem to use this word mistakenly where "quandary" would fit better.
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  • eskbanker
    eskbanker Posts: 30,939 Forumite
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    Worth noting the significance of FSCS in protecting the assets of clients with holdings below £50K, as per https://www.pwc.co.uk/services/business-recovery/administrations/beaufort/beaufort-faqs.html:
    The administrators have worked closely with the Financial Services Compensation Scheme (FSCS) and have confirmed that, where eligible clients have client money and assets held with Beaufort Asset Clearing Services Limited (BACSL) with a shortfall of up to a value of £50,000, such clients will have their shortfalls made good by the FSCS.
  • Malthusian
    Malthusian Posts: 10,931 Forumite
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    There was a similar case five years ago when Hume Capital (formerly XCap) went bust. The FSCS has confirmed that they will compensate any shortfall, which would include admin fees.

    Administrators need to be paid and you can't stop that, however if you invest via a regulated platform the FSCS should ensure you don't make a loss - assuming your share of the administrator fees isn't more than £50,000.
  • MK62
    MK62 Posts: 1,446 Forumite
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    justme111 wrote: »
    The question may be silly as I don't know much about the topic of investments and legislation.
    If a broker Beaufort securities went into administration and the money invested through them can be used for admin fees what is to stop the same happening with any platform we use?

    I'm not a lawyer, but sadly I suspect the truth is.......nothing really!

    What is shocking though here, is the level of fees (up to £100M) which the administrator could charge for the return of "supposedly" ring-fenced client assets/money - perhaps that part of the winding up process should be put out to competitive tender. A quick glance at the articles, suggest the administrator has put a value of 500M on these assets (down from an initial 800M), so 100M in fees would seem awfully high!
  • Malthusian
    Malthusian Posts: 10,931 Forumite
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    MK62 wrote: »
    What is shocking though here, is the level of fees (up to £100M) which the administrator could charge for the return of "supposedly" ring-fenced client assets/money - perhaps that part of the winding up process should be put out to competitive tender.

    It almost certainly was. There are numerous accountants which do insolvency work. If you believe there's room to undercut them then anyone's free to gain the qualifications and enter the market.
    A quick glance at the articles, suggest the administrator has put a value of 500M on these assets (down from an initial 800M), so 100M in fees would seem awfully high!
    I'm not very familiar with the going rate for insolvency administrators. However, I've seen a case (possible Ponzi scheme Privilege Wealth) where the administrators are charging 30% of all recoveries. So 20% doesn't strike me as unduly high. And it will be paid by the FSCS and not the investors if it results in a loss under £50,000.

    Remember £100m is the "worst-case scenario". As criminal charges are being brought against the company by the FBI, it falls on PwC as administrators to defend those charges in the best interests of the investors. That's not going to be cheap. It's not £100m going into PwC's pocket.

    Beaufort Securities clients hold an awful lot of toxic unregulated junk. "Moving Asset X from account A to account B", as one Citywire commenter puts it, is not necessarily a straightforward matter if Asset X is a Ponzi scheme registered in Dubai that no stockbroker B in their right mind would accept nominee ownership of, and where the administrators of asset X are unlikely to be co-operative in transferring title.

    Until we find out what KPMG, Deloitte and E&Y were offering to take over as administrators, there is no evidence that PwC's quote is over the going rate.
  • tg99
    tg99 Posts: 1,198 Forumite
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    Some relevant discussion on this thread:

    https://forums.moneysavingexpert.com/showthread.php?t=5837938&highlight=beaufort

    House of Lords question answered yesterday on this seems to confirm the legality of using client assets to pay administrators fees hence the possibility of suffering a loss if you have a portfolio of over £50k if !!!8216;one of the platforms we use!!!8217; goes into administration.

    You would hope the haircut would be less than that at Beaufort due to economies of scale and perhaps a less complex administration process but who knows!
  • MK62
    MK62 Posts: 1,446 Forumite
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    Malthusian wrote: »
    It almost certainly was.

    Was it?......can you elaborate on that?
    Malthusian wrote: »
    There are numerous accountants which do insolvency work. If you believe there's room to undercut them then anyone's free to gain the qualifications and enter the market.

    Fair point, but do you apply this logic universally? ;)

    Malthusian wrote: »
    I'm not very familiar with the going rate for insolvency administrators.

    Me neither, though I believe it's well over £1000 per hour for the big cheeses!!
    Malthusian wrote: »
    However, I've seen a case (possible Ponzi scheme Privilege Wealth) where the administrators are charging 30% of all recoveries. So 20% doesn't strike me as unduly high.

    I'm not really sure that's a justification
    Malthusian wrote: »
    And it will be paid by the FSCS and not the investors if it results in a loss under £50,000.

    Fair point again, but where does the FSCS gets it's money?
    Malthusian wrote: »
    Remember £100m is the "worst-case scenario". As criminal charges are being brought against the company by the FBI, it falls on PwC as administrators to defend those charges in the best interests of the investors. That's not going to be cheap. It's not £100m going into PwC's pocket.

    Beaufort Securities clients hold an awful lot of toxic unregulated junk. "Moving Asset X from account A to account B", as one Citywire commenter puts it, is not necessarily a straightforward matter if Asset X is a Ponzi scheme registered in Dubai that no stockbroker B in their right mind would accept nominee ownership of, and where the administrators of asset X are unlikely to be co-operative in transferring title.

    While I've only glanced at the articles, I was under the impression that this is what the £300M write-down in asset valuation was meant to cover.
    Malthusian wrote: »
    Until we find out what KPMG, Deloitte and E&Y were offering to take over as administrators, there is no evidence that PwC's quote is over the going rate.

    I doubt we ever will, and it may be the going rate, but being the "going rate" doesn't, in itself, make it justifiable.
  • eskbanker
    eskbanker Posts: 30,939 Forumite
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    MK62 wrote: »
    where does the FSCS gets it's money?
    Via levies from the institutions it's set up to cover, as explained in detail at https://www.fscs.org.uk/what-we-cover/about-us/how-we-are-funded/.
  • MK62
    MK62 Posts: 1,446 Forumite
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    eskbanker wrote: »
    Via levies from the institutions it's set up to cover,

    Who get it from? ;)
  • dunstonh
    dunstonh Posts: 116,318 Forumite
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    Fair point again, but where does the FSCS gets it's money?

    Me.

    Just as everyone is starting to enjoy their summer holidays, the FCA decide they are really just there to spoil the fun and send out the bills for all the levies as its easier to punish the good rather than deal with the bad. In my case, I tend to get the bill a few days from my birthday. There I am thinking the FCA have sent me a birthday card. Alas no. It's the second biggest bill of the year. Happy Birthday.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • justme111
    justme111 Posts: 3,508 Forumite
    First Post First Anniversary Combo Breaker I've been Money Tipped!
    dunstonh wrote: »
    Me.

    Just as everyone is starting to enjoy their summer holidays, the FCA decide they are really just there to spoil the fun and send out the bills for all the levies as its easier to punish the good rather than deal with the bad. In my case, I tend to get the bill a few days from my birthday. There I am thinking the FCA have sent me a birthday card. Alas no. It's the second biggest bill of the year. Happy Birthday.

    I wonder whether these attempts at regulation that do a lot of bad under pretence of doing good happen in all first world countries... as they definitely happen in the UK in healthcare , teaching and i suspect other sectors.. the real issues are not addressed but something is done to tick the box..
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
    Often people seem to use this word mistakenly where "quandary" would fit better.
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