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  • FIRST POST
    • justme111
    • By justme111 9th May 18, 12:49 PM
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    justme111
    collapse of Beaufort - how is it different to investment platforms we use
    • #1
    • 9th May 18, 12:49 PM
    collapse of Beaufort - how is it different to investment platforms we use 9th May 18 at 12:49 PM
    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
Page 1
    • eskbanker
    • By eskbanker 9th May 18, 1:01 PM
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    eskbanker
    • #2
    • 9th May 18, 1:01 PM
    • #2
    • 9th May 18, 1:01 PM
    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
    • By Malthusian 9th May 18, 1:07 PM
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    Malthusian
    • #3
    • 9th May 18, 1:07 PM
    • #3
    • 9th May 18, 1:07 PM
    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
    • By MK62 9th May 18, 2:01 PM
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    MK62
    • #4
    • 9th May 18, 2:01 PM
    • #4
    • 9th May 18, 2:01 PM
    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?
    Originally posted by justme111
    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
    • By Malthusian 9th May 18, 2:19 PM
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    Malthusian
    • #5
    • 9th May 18, 2:19 PM
    • #5
    • 9th May 18, 2:19 PM
    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.
    Originally posted by MK62
    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
    • By tg99 9th May 18, 3:55 PM
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    • #6
    • 9th May 18, 3:55 PM
    • #6
    • 9th May 18, 3:55 PM
    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
    • By MK62 9th May 18, 3:56 PM
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    MK62
    • #7
    • 9th May 18, 3:56 PM
    • #7
    • 9th May 18, 3:56 PM
    It almost certainly was.
    Originally posted by Malthusian
    Was it?......can you elaborate on that?

    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.
    Originally posted by Malthusian
    Fair point, but do you apply this logic universally?


    I'm not very familiar with the going rate for insolvency administrators.
    Originally posted by Malthusian
    Me neither, though I believe it's well over 1000 per hour for the big cheeses!!

    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.
    Originally posted by Malthusian
    I'm not really sure that's a justification

    And it will be paid by the FSCS and not the investors if it results in a loss under 50,000.
    Originally posted by Malthusian
    Fair point again, but where does the FSCS gets it's money?

    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.
    Originally posted by Malthusian
    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.

    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.
    Originally posted by Malthusian
    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
    • By eskbanker 9th May 18, 5:43 PM
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    eskbanker
    • #8
    • 9th May 18, 5:43 PM
    • #8
    • 9th May 18, 5:43 PM
    where does the FSCS gets it's money?
    Originally posted by MK62
    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
    • By MK62 9th May 18, 7:11 PM
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    MK62
    • #9
    • 9th May 18, 7:11 PM
    • #9
    • 9th May 18, 7:11 PM
    Via levies from the institutions it's set up to cover,
    Originally posted by eskbanker
    Who get it from?
    • dunstonh
    • By dunstonh 9th May 18, 7:40 PM
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    dunstonh
    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). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • justme111
    • By justme111 9th May 18, 8:23 PM
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    justme111
    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.
    Originally posted by dunstonh
    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..
    • grey gym sock
    • By grey gym sock 9th May 18, 8:57 PM
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    grey gym sock
    i completely disagree that FSCS does more harm than good.

    the basic model - of getting the good financial service providers to pay to compensate for losses caused by the bad ones - may be annoying (especially if you're 1 of those paying), but i don't think there's a better alternative.

    however, the bill could be lower if the FCA were better at shutting down dodgy firms/investments more quickly.
    • dunstonh
    • By dunstonh 9th May 18, 9:45 PM
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    dunstonh
    the basic model - of getting the good financial service providers to pay to compensate for losses caused by the bad ones - may be annoying (especially if you're 1 of those paying), but i don't think there's a better alternative.
    There is little alternative. Some have suggested an insurance type scheme that is paid based on the risk of the business being carried out. But nothing came of it.

    The bit that is frustrating is the FCA's (and FSA before it) inability to target the firms that cause the problems. I have pointed out scams or issues to the regulator in the past and they dont want to know. For example, I tried reported a mortgage firm to the FCA who were transacting investment advice into unregulated investments using SIPPs. The FCA didnt want to know. Indeed, the lady got quite stroppy at me. The firm has now deauthorised and all complaints are being passed onto the FSCS. That firm never paid any investment class FSCS levies. The sellers in that firm were not individually authorised (mortgage and insurance individuals have no control functions). So, they can just phoenix and do it again.

    Another frustrating thing is that the dodgy companies tend to have little history. They set up, dont pay any levies in year one and then close again by year 3-5. The firms/advisers with decades of history pay year in year out.

    Cost of compliance with regulations is the major cost. Regulation, compliance with regulation and regulatory costs takes about a third of your income.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Col Jessop
    • By Col Jessop 10th May 18, 10:22 AM
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    Col Jessop
    I'm not sure this should only be a matter for the FCA and PWC to manage. It is time Beaufort were properly investigated by the police. It looks pretty clear that this is more than just a simple case of bad advice being given and is looking more like cash and assets have been removed (stolen) from accounts. Why after all this time are clients still locked out of viewing their accounts?
    • greatkingrat
    • By greatkingrat 10th May 18, 2:58 PM
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    greatkingrat
    Does the FSCS 50k limit apply to the total assets, or the loss incurred? If someone had a 250k portfolio and the administrators take 20% fees, would they be covered because they have only lost 50k?
    • MK62
    • By MK62 10th May 18, 3:41 PM
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    MK62
    In theory yes, however it would appear that it may in fact be far more nuanced than that.

    You are in fact only covered for financial loss, which in the case of investments and the FSCS, means restoring your finances to the state they would have been in if you had never invested into the investment in default.
    • greatkingrat
    • By greatkingrat 10th May 18, 7:48 PM
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    greatkingrat
    So if you invested 10k 5 years ago and it has risen to 15k now they could just pay you back the 10k? I wonder if they would pay you back more than the current value if the investment had fallen?
    • MK62
    • By MK62 11th May 18, 6:45 AM
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    MK62
    So if you invested 10k 5 years ago and it has risen to 15k now they could just pay you back the 10k? I wonder if they would pay you back more than the current value if the investment had fallen?
    Originally posted by greatkingrat
    Good question!
    • Col Jessop
    • By Col Jessop 11th May 18, 11:48 AM
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    Col Jessop
    Looks like things are starting to move. Email have gone out detailing the process. Even that is looking like a disorganised shambles. They are sending out what are effectively settlement offers. The Bar Date is the 8th June. It also has a fast track process for the FSCS claim - again that appears to be an offer rather than possibly all you are actually entitled to.

    The process involves two emails - one with your user name - it tells you that a second email be will be sent "shortly" with a link to create your password. Over 24 hours now and no email. I suspect the process is broken rather than it just being PWC having a different interpretation to shortly than the rest of online world.

    And just for fun I got a call from the FSCS with an update. The update was that nothing has changed and that they still have not agreed a process with PWC / FCA. I explained that we had recieved emails from PWC detailing the process and that the process was also published on PWCs website. The contact centre manager told me that the information on his system was correct and refused to investigate the misinformation. If anyone gets a call from the FSCS best to treat it like a scam call as they are a dangerous combination of incompetence and arrogance.

    If you haven't got the email yet then the info is on the PWC website. I can't post a link - forum rules - if you google this you will find it - PWC beaufort bar date june
    • Col Jessop
    • By Col Jessop 14th May 18, 11:00 AM
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    Col Jessop
    The chap from FSCS called back and left a voice mail. It still had the same arrogant tone; however it looks as if he did actually investigate and indeed found that his system was indeed wrong.

    If anyone is depending on the FCA, PWC or the FSCS to protect their interests after the fraud at Beaufort then you need to wake up soon or face losing significant sums of money. The FCA let the Beaufort scam run longer than it had to in the full knowledge that investors were going to face significant losses. Investors were still able to pour more money into Beauforts known about black hole whilst being told that their money was safe as Beaufort was regulated.

    PWC's first action was to lock everyone out of their accounts. Beauforts system was set at two levels of access. The base level was view only. There was then a 2 factor authentication system for carrying out transactions. Why not leave the view only access live so victims could check and se if there was anything missing from their account.

    FSCS are bought and paid for by the finance sector. From what I have seen so far they are a shambles designed to frustrate and confound the victims of the finance sector rather than to protect us from fraud.

    The Beaufort situation has the air of state sanctioned fraud / theft. Many clients are facing huge losses - often a large percentage of their retirement investments. We really need to see a police investigation into what has gone on at Beaufort including the FCA's part in delaying action against Beaufort and the subsequent lack of publically available information to victims and the removal of view only access to accounts.

    Still waiting for a password to be sent - the Bar Date process is also looking like a shambles. Still no access to check what the actual offer is.
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