What would happen if H&L went into administration today?
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stphnstevey
Posts: 3,224 Forumite
Im using the largest UK fund broker as a worst case scenario, but what would happen if H&L, YouInvest, IWeb, XO etc were to fail and go into administration?
What protections are there from the FCA?
Would client money be ring fenced?
Who would pay administrators costs?
How long before any money would be returned?
What other factors would need to be considered?
What protections are there from the FCA?
Would client money be ring fenced?
Who would pay administrators costs?
How long before any money would be returned?
What other factors would need to be considered?
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Comments
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HL is a profitable business model so if for some unexpected reason it failed then several of it's competitors would bid against each other to buy the customer base from the administrators and transfer the assets onto their platform.
As HL is stock market listed then it would have other options to raise capital in advance of going into administration.0 -
stphnstevey wrote: »Im using the largest UK fund broker as a worst case scenario, but what would happen if H&L, YouInvest, IWeb, XO etc were to fail and go into administration?
What protections are there from the FCA?
Would client money be ring fenced?
Who would pay administrators costs?
How long before any money would be returned?
What other factors would need to be considered?
FCA - see https://www.fca.org.uk/about/protecting-consumers (regulatory function, so doesn't compensate for any losses)
Client money - depends on where/how it is held
Administrators' costs - priority charge on any assets the business has
Return of money (if any) - impossible to guess, but could be looking at years.0 -
see http://www.hl.co.uk/security-centre/how-safe-is-your-investment particularly the section Client money is held on Trust.0
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Im using the largest UK fund broker as a worst case scenario, but what would happen if H&L, YouInvest, IWeb, XO etc were to fail and go into administration?
HL are not the largest. I havent seen any figures lately but they were third last time I saw. (Aegon/Cofunds and Fidelity I believe are the ones ahead).What protections are there from the FCA?
Just regulatory stuff that affects all companies. There is no consumer protection as such from the FCA as that is not their role. They put in place the rules and regulations that required from the EU as well as the gold plating and any localised issues the have concerns over. Consumer protection would form part of their consideration when making rules but they do not provide any direct consumer protection themselves.How long before any money would be returned?
There would be a fight for the assets as the chance to pick up assets under management on the cheap would mean the administrator should find it easy to get a buyer. So, its likely it would continue as a going concern. However, if it didnt, then it could take 6 months to get assets re-registered away.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.0 -
For investments held, the first £50k should be covered by the FSCS whilst one would hope anything in excess of that would be ok too given segregation of client assets (though fraudulent behaviour would put this at risk). However, I am not totally sure whether the administrators could haircut this excess by deducting their fees from it - see the recent demise of Beaufort Securities.0
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I would, perhaps, be more concerned about the failure/corruption of the company's IT systems. Client investments only exist as entries in a database. (Just like bank deposits).0
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Yes but all that goes out the window when there is fraud (like Madoff simply trousering the money and falsifying the records ) or loss of Data as A Nice Englishman points out - maybe the biggest risk.WaywardDriver wrote: »see http://www.hl.co.uk/security-centre/how-safe-is-your-investment particularly the section Client money is held on Trust.
But Madoff was able to keep it to himself by effectively operating as a one man band, working on a nod and a wink and encouraging his clients to keep quiet by insinuating they were benefitting from insider trading. That really should have rung alarm bells because they say you can't con an honest man. You have to tell him he is getting something for nothing to get him to go along with it. Like the frauds we are seeing where unsophisticated investors have been trying to hide their parent's house in a trust to avoid it being used to pay care home fees, and have been conned out of it.
As far as I can see big firms like HL couldn't do anything like that because too many people are involved to keep a serious fraud quiet.
Ultimately though, you can't eliminate risk altogether.
You have to trust the system to some extent.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
So £50k FCA protection, hopefully ring fenced client funds, data integrity important, potential demand for purchasers of client list/portfolio, unknown administration fees and who pays them and how long before return of funds
Other than BS, have there been any past brokers go into administration and example of what happened?
Would the reason for administration, such as fraud, cause any differences?0 -
Just reading the second of my 3 for a £1 copies of Money Observer and this question has just been asked in the readers question section.Basically the reader ask's is it better to have more then one platform for safety & if one is in trouble funds could be used from the other.
The main points in the reply from Interactive investor (who publish the mag) is that investment firms are covered by a Special Administration Regime (SAR).And if a platform fails the FCA would be involved in appointing an Insolvency Practitioner who would see if the company can survive.If not the IP should oversee the return of clients money and assets either to the client or a new investment platform.They do also admit that having more then one platform might offer protection against the short term impact of insolvency (but don't say how long short-term is!)
P.s that's only my view of the answer - may want to check:)0 -
you own units in the underlying fund so if HL went bust it wouldnt impact your holdings just the admin around it (obviously if you held cash it would be different and subject to the client money rules).0
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