Issues of building society PIBS only tradable in certificated form

[OldBoyReturns]

HI all - long time no see! Can I pick your brains as I seem to have stumbled across an issue which needs resolving. I hold a variety of building society PIBS in tax wrappers and, while trying to tidy up my accounts and add to holdings, have discovered that:
1. Some brokers will no longer deal many issues of PIBS.
2. Some brokers will not accept transfer of many issues of PIBS into an ISA or SIPP.
3. Online trading of many issues of PIBS is no longer possible.
I have read a couple of old threads on here where the issue has been discussed but it seems the problem has only deteriorated. My current understanding is that the problem arises from some issues of PIBS only being settled in certificated form - ie they have not been 'dematerialised' so that they can be settled in CREST. This means that back offices are having to reregister certificated holdings with the registrars behind the scenes in order to facilitate trades for clients with some brokers refusing to do it. This manual process and associated withdrawal of support by brokers gives rise to a number of issues such as:
- distorted market / mis-pricing in affected issues of PIBS
- problems moving or consolidating SIPPs and ISAs containing affected holding of PIBS
- big delays with reconciliation of and payment of interest to clients - especially where taxes have taken place close to payment dates
- potential for issuers to take advantage of the situation through low price tenders offers or even delisting

Pre Brexit I believe all UK listed securities would have to be dematerialised by start of 2025. I think this originated from the EU Central Securities Depositary Regulation which, presumably, doesn't apply post Brexit. I do not know whether another requirement has replaced it in the UK but am trying to find out. However, it is clearly as issue which needs to be resolved through issuers working with their registrars to dematerialise the PIBS in question. Below is a list of Issues of PIBS I believe to be stuck in certificated form at present:

GB0006361371 NEWCASTLE BUILDING SOCIETY 12.625% BDS PERP GBP1000 'REGS'
GB0001777886 NATIONWIDE BUILDING SOCIETY 7.859% SUB BDS PERP GBP100000
GB0002290764 COVENTRY BUILDING SOCIETY 12.125% SUB NTS PERP GBP1000
GB0006315302 NATIONWIDE BUILDING SOCIETY IDX/LKD SNR BDS 23/02/2024 GBP1
GB0005104913 LEEDS BUILDING SOCIETY 13.375% CNV SUB NTS PERP GBP1000 'REGS'
GB0008194119 SKIPTON BUILDING SOCIETY 12.875% SUB NTS PERP GBP1000 'REGS'
GB0006371529 NEWCASTLE BUILDING SOCIETY 10.75% BDS PERP GBP1000 'REGS'
GB0030517931 NOTTINGHAM BUILDING SOCIETY 7.875% BDS PERP GBP5000 'REGS'
GB0008775057 MANCHESTER BUILDING SOCIETY 8% BDS PERP GBP1000 'REGS'
GB0004440623 SKIPTON BUILDING SOCIETY 8.5% SUB BDS PERP GBP2500 'REGS'
GB0033627968 NATIONWIDE BUILDING SOCIETY 6.25%-FRN SUB PERP GBP1000 'REGS'
GB00B0712W15 MANCHESTER BUILDING SOCIETY 6.75% BDS PERP GBP1000 'REGS'
XS0498549194 YORKSHIRE BUILDING SOCIETY 13.5% LT2 NTS 01/04/2025 GBP500 'REGS'
GB0001918076 NATIONWIDE BUILDING SOCIETY FRN PERP GBP1000

[Holts]

Welcome back .

I have these problems , I did manage to correspond with Skipton Treasury and they became easily tradeable , however this was only for a brief period as they came upon the matching trades issue etc and withdrew .

Selftrade taken over by II then by Aberdeen have been reducing online trading , Notts 7 and BOI were the most recent to be removed from online , wrote pointing out that there is a niche market in these instruments and that an online broker specialising in these sorts would attract some reasonable business , seemingly no one is interested , if you were fortunate to hold when these companies were merged you got to keep them in your ISA but selling out , I haven’t tried just been collecting the income as I guess you have .

[hiriskpaul]

Hi Mark, pleased to hear from you again. Yes this has become a pain, but does not affect all the issues you mention. The only PIBS I am aware of that has this problem are these:

GB0002290764 COVENTRY BUILDING SOCIETY 12.125% SUB NTS PERP GBP1000
GB0005104913 LEEDS BUILDING SOCIETY 13.375% CNV SUB NTS PERP GBP1000 'REGS'
GB0008194119 SKIPTON BUILDING SOCIETY 12.875% SUB NTS PERP GBP1000 'REGS'

I hold LEEDS and SKIPTON at Hargreaves Lansdown. Was previously able to buy online, but can now only sell and when I try online I can never get a quote, even for £1k nominal, so I think they are over the phone only. I used to hold COVENTRY but sold that some time ago and I cannot remember whether that was before the reqstrictions came in.

I have no problem trading these and hold some of them, not all available online though:

GB0001777886 NATIONWIDE BUILDING SOCIETY 7.859% SUB BDS PERP GBP100000
GB0004440623 SKIPTON BUILDING SOCIETY 8.5% SUB BDS PERP GBP2500 'REGS'
GB0006371529 NEWCASTLE BUILDING SOCIETY 10.75% BDS PERP GBP1000 'REGS'
GB0030517931 NOTTINGHAM BUILDING SOCIETY 7.875% BDS PERP GBP5000 'REGS'
GB0008775057 MANCHESTER BUILDING SOCIETY 8% BDS PERP GBP1000 'REGS'
GB0033627968 NATIONWIDE BUILDING SOCIETY 6.25%-FRN SUB PERP GBP1000 'REGS'
GB00B0712W15 MANCHESTER BUILDING SOCIETY 6.75% BDS PERP GBP1000 'REGS'
XS0498549194 YORKSHIRE BUILDING SOCIETY 13.5% LT2 NTS 01/04/2025 GBP500 'REGS'
GB0001918076 NATIONWIDE BUILDING SOCIETY FRN PERP GBP1000

These are not available on the HL platform for some reason, so I don't know whether they are affected:

GB0006361371 NEWCASTLE BUILDING SOCIETY 12.625% BDS PERP GBP1000 'REGS'
GB0006315302 NATIONWIDE BUILDING SOCIETY IDX/LKD SNR BDS 23/02/2024 GBP1

hope that helps.

[OldBoyReturns]

Thanks for responses. The list of PIBS I posted includes those issues of PIBS which market makers say are certificated only. Very mysterious if brokers support some but not others as settlement process would be the same for all.

The matched trades excuse sounds wrong. Market makers provide liquidity.

[Holts]

Thanks for responses. The list of PIBS I posted includes those issues of PIBS which market makers say are certificated only. Very mysterious if brokers support some but not others as settlement process would be the same for all.

The matched trades excuse sounds wrong. Market makers provide liquidity.

My error , I have found the email from Skipton when they were withdrawn from Crest.

Thank you for your interest in the Skipton Building Society 12.875% PIBS.

Following the admittance of the Skipton 12.875% PIBS to trade in CREST in July this year, we have unfortunately had to take the decision to withdraw them from the CREST system from 11 October 2019. The reason for us having to withdraw the PIBS from CREST is that the brokers / market makers for this security were unable to settle the trades. From 11 October the PIBS will trade and settle in certificated form as they did before they were admitted to CREST.

[hiriskpaul]

This is the message I received from HL about this (08/04/2021):

Dear

Our clients’ investment into PIBS which cannot be held electronically has decreased significantly and as a result only a very small number buy these types of investments through us now. We’ve therefore made the decision to no longer offer new buys into PIBS we cannot hold electronically. You can continue to hold any PIBS you have which aren’t held electronically with us and sell them at any time, you just can’t buy anymore.

We have a number of PIBS which can be held electronically available through our website, more information on these can be found here.

We know this will be a disappointing message for some of our clients to read and we are sorry for any inconvenience it may cause. If you need help with trading online or over the telephone or would like to find out more about what other services HL offer, please visit our website or get in touch.

Yours sincerely,

HL

Sold "Hold electronically" seems to be the issue.

[OldBoyReturns]

Sold "Hold electronically" seems to be the issue.

Thanks. I would imagine the security needs to have been dematerialised from certificated form to be capable of being held electronically.

I get the feeling we are going to find everyone blaming each other for this unsatisfactory situation.

[GrahamPlatt]

Nothing to add to help, but hope you won’t mind me butting in to say how very pleased I am to hear from you again.
Welcome back indeed. Hope you’ll stick around. You’ve been missed.

[OldBoyReturns]

Following the admittance of the Skipton 12.875% PIBS to trade in CREST in July this year, we have unfortunately had to take the decision to withdraw them from the CREST system from 11 October 2019. The reason for us having to withdraw the PIBS from CREST is that the brokers / market makers for this security were unable to settle the trades. From 11 October the PIBS will trade and settle in certificated form as they did before they were admitted to CREST.

I have done some further investigating and it seems this explanation from Skipton is not the full story. I am told the main problem was that CREST did not set up the PIBS so that the dealing units functioned properly. It seems they have some problem on their system with, taking SKIP as an example, there being 25,000 PIBS with face value of £1,000 each rather than 25,000,000 with face value of £1 each. This hardly sounds unsurmountable or something which could not be fixed with some simple coding.

Can anyone think of examples of fixed income securities which were not issued in units with face value of £1 and which settle happily in CREST?

[hiriskpaul]

Following the admittance of the Skipton 12.875% PIBS to trade in CREST in July this year, we have unfortunately had to take the decision to withdraw them from the CREST system from 11 October 2019. The reason for us having to withdraw the PIBS from CREST is that the brokers / market makers for this security were unable to settle the trades. From 11 October the PIBS will trade and settle in certificated form as they did before they were admitted to CREST.

I have done some further investigating and it seems this explanation from Skipton is not the full story. I am told the main problem was that CREST did not set up the PIBS so that the dealing units functioned properly. It seems they have some problem on their system with, taking SKIP as an example, there being 25,000 PIBS with face value of £1,000 each rather than 25,000,000 with face value of £1 each. This hardly sounds unsurmountable or something which could not be fixed with some simple coding.

Can anyone think of examples of fixed income securities which were not issued in units with face value of £1 and which settle happily in CREST?

One that springs to mind was LLPF, called some time ago, but that had a face value of £1000 per share. From memory I think a few other HBOS/Lloyds prefs did as well.

The prefs always traded dirty of course and maybe the problem is with the accrued interest calculation?

[OldBoyReturns]

One that springs to mind was LLPF, called some time ago, but that had a face value of £1000 per share. From memory I think a few other HBOS/Lloyds prefs did as well.

The prefs always traded dirty of course and maybe the problem is with the accrued interest calculation?

Thanks - good example. Interest calculation problems have not been mentioned by brokers or MM's and shouldn't be one if set up correctly (eg SKIP as 25,000 PIBS with face value of £1,000 each). I have now written to Skipton setting out the issues and proposing the solution and have MM's looking at it. Will keep you posted.

[bruncher]

I was able to purchase SKIPTON BS 12.875% SUB PERP GBP1000 twice last year (April and October) in my AJ Bell Dealing Account. I can't remember if I had to phone through to deal, but I was charged the online rate on both occasions.

[Borderline]

Back in August 2017 when Barclays were moving my wife’s SIPP account with Barclays Stockbrokers to Smart Investor we received the following:

We'll move your account(s) as planned but we won’t be able to take across these unsupported assets. You can find full detajls of these assets in the table enclosed.
051O49I LEEDS BUILDING SOCIETY

The explanation was they were held in certificated form although we had bought and held them in a nominee account.
In September we were told the PIBs had now been transferred to a “Shell Account” as paper certificates could not be held on Smart Investor platform.

On 27th September and being thoroughly fed up with Barclays we started the process of transferring the SIPP to Hargreaves Lansdown.
In December Barclays confirmed the PIBs could now be transferred to HL
By 13th February the PIBs still had not arrived at HL and we were told by Barclays they were being held in “safe custody”.
On 16th Feb we suggested they sell them as they were delaying the transfer and were told they couldn’t sell them because of some new legislation.
They finally arrived in the HL account on 29th March almost 6 months after we first requested the transfer.

Letters to Leeds Building Society were never answered or even acknowledged.

I wish you all the best Mark in trying to resolve the mysterious workings of Building Society PIBs and dumb Investor platforms.

[Holts]

I wish you all the best Mark in trying to resolve the mysterious workings of Building Society PIBs and dumb Investor platforms.[/quote]


I guess it is largely the administrative tale wagging the dog , low cost platforms want it all to execute automatically , the volume of trades doesn’t justify putting any effort in and they have the cop out of the ‘too complicated for you poor investors to understand’ .

[OldBoyReturns]

Thanks for replies. Brief update:

1. Now in communication with Leeds, Skipton & Coventry to try to resolve the issue through dematerialisation of the issues of PIBS in question so that they can be held in CREST and retail brokers will have no excuse not to support them. Some progress although issues wary of a repeat of previous settlement problems (see 3 below).

2. The issues of PIBS affected are those issued in the early 1990's in certificated only form in denominations greater than £1 face value per PIBS. Typically they were issued as £1,000 per PIBS.

3. Skipton tried dematerialising SKIP (the 12.875% PIBS) in 2019 but it all went pear shaped due to settlement problems caused by one party to numerous trades getting the quantity wrong due. For example, taking a trade of £50,000 face value as £50,000 PIBS (incorrect) rather than 50 PIBS (correct). It is not clear why this happened because a number of other similar PIBS (eg NOTP - Nottingham 7.785%, which is £5,000 per PIBS) settle in CREST without problems. So it could have been incorrect set-up in CREST by the issuers' registrars or, perhaps, retail brokers getting it wrong. I have certainly had some very tedious calls to nameless retails brokers to try to purchase PIBS where they have insisted I am buying 1,000 times more PIBS than I know I am ... and could not be persuaded otherwise.

I will keep you posted and would welcome any examples of problems people have encountered either dealing, holding or transferring PIBS.

[Bern]

Over the past year I have bought SKIP, CVBP and LDS and sold LDS all through AJ Bell into a SIPP. All via the phone and there is the option of at best or fill or kill which I always use. If the fill or kill fails they will contact you with a price. Surprisingly, to me anyway, they only charge £9.95 for a phone trade given the faff on that seems to be required. (Oddly when the trade first goes through they appear to charge £20 but this is always adjusted to the dealing charge they quote on the phone).

They or at least the AJ Bell person to whom the telephone dealer refers seems to understand this issue of whether a PIB costs about £1 or about £1000 or whatever, which they need to get right, and they always have with my trades which are always small - £5-£10K.

[Jwdool]

From Hargreaves on 2nd Feb 2023:

"Further to our telephone conversation, I have spoken with relevant colleagues and investigated into your query further.

I am afraid whilst I have confirmed in my previous secure message that the three bonds listed below are available on the HL platform, we are unable to facilitate the transfers of these bonds to the HL platform. The reason being that these bonds can only trade in certificated form and the process is lengthy and very open to delays meaning that as a company we are often put in a position of not easily being able to verify the assets under our management. As a result, we have made a business decision to not facilitate the transfers of these holdings.

- Skipton Building Society 12.875% Permanent Interest Bearing Shares
- Leeds Building Society 13.375% Permanent Interest Bearing Shares
- Coventry Building Society 12 1/8% Permanent Interest Bearing Shares

Furthermore, whilst these bonds are still available on the HL platform, both Skipton and Leeds Building Society PIBs are only available on a sell-only basis. Clients cannot buy additional units in the two aforementioned PIBs. Please accept my apologies for any inconvenience this may have caused.

I trust this has clarified the matter. If you have any other questions, please get back to me.

Kind Regards

Brian
Hargreaves Lansdown"

[BobGe]

One that springs to mind was LLPF, called some time ago, but that had a face value of £1000 per share. From memory I think a few other HBOS/Lloyds prefs did as well.

Thanks - good example.

My recollection is that some (most?) of these PIBs / Prefs issues were launched, offered at par with nominal £1.00 / unit, with the minimum initial purchase of 1000 / £1000, some in additional lots of 1000 / £1000, some available in 1 / £1 lots thereafter. This seemed to result in administrative units of 1000 being set. Once in the secondary market one could, in some cases at least, (technically) buy a single £1 nominal unit but I believe some brokers still required the 1000 min. figure for trades.

A secondary issue was that these were generally priced in GBP rather than GBX, giving rise to entry problems. For example, within FT website portfolio (provided by Refinativ, part of LSE) it shows I hold 120 units of 42TE, but it's actually 12000 nominal. One has to apply a 100 divider because the actual price feed in GBX is treated as though it's in GBP.

[bruncher]

I was in correspondence with Skipton in 2019 regarding the difficulty of trading their PIBS.This is one of their replies:

'The PIBS were unable to be electronically matched in CREST due to the market-makers trading these securities at face amount (i.e. one PIB has a notional amount of £1) which differs from what the registrar are able to correctly record (i.e. one PIB has a notional amount of £1000). This meant that brokers could have potentially been left with unsettled positions. Our registrar was in touch with the London Stock Exchange and Euroclear (CREST) regarding this and their solution was to withdraw the PIBS from trading in CREST.'

More recently I have been able to buy SKIP via AJ Bell. But it has to be done by phone.

[OldBoyReturns]

My recollection is that some (most?) of these PIBs / Prefs issues were launched, offered at par with nominal £1.00 / unit, with the minimum initial purchase of 1000 / £1000, some in additional lots of 1000 / £1000, some available in 1 / £1 lots thereafter. This seemed to result in administrative units of 1000 being set. Once in the secondary market one could, in some cases at least, (technically) buy a single £1 nominal unit but I believe some brokers still required the 1000 min. figure for trades.

Most of the issues off PIBS I have looked at were issued as individual PIBS of £1,000 rather than £1. Note 1 PIBS is 1 share. Hence they cannot be divided into lots of less than £1,000. Some issues issued as PIBS of £5,000 or £2,500. For example:

Newcastle 12.625% PIBS issued as 10,000 PIBS of £1,000 each in 1992
Coventry 12.125% PIBS issued as 40,000 PIBS of £1,000 each in 1992
Leeds 13.375% PIBS issued as 25,000 PIBS of £1,000 each in 1992
Skipton 12.875% PIBS issued as 25,000 PIBS of £1,000 each in 1992
Newcastle 10.75% PIBS issued as 10,000 PIBS of £1,000 each in 1993
Nottingham 7.7875% PIBS issued as 5,000 PIBS of £5,000 each in 2001
Skipton 8.5% PIBS issued as 6,000 PIBS of £2,500 each in 2000

So there is no logical explanation for Coventry 12.125%, Leeds 13.375% and Skipton 12.875% not being suitable for dematerialisation into CREST when:

1. Other issues with the same features and time of issue (such as Newcastle 12.625%) can be settled in CREST.
2. Other issues from the same issuer (such as Skipton 8.5%) can be held in CREST.