Issues of building society PIBS only tradable in certificated form

[Borderline]

Came across this announcement in the FT when researching Newcastle Pibs and hadn’t realised it was only relatively recently they had been admitted to Crest:

Permanent Interest Bearing Shares
AUGUST 5, 2020Source: RNS
RNS Number : 1993V
Newcastle Building Society
05 August 2020
 
Newcastle Building Society introduces the CREST settlement facility to the £10 million 12.625% and 10.75% Permanent Interest Bearing Shares
 
Newcastle Building Society ("The Society") wishes to provide notice of a decision to enable for CREST settlement the Society's two £10 million Permanent Interest Rate Bearing Shares ("PIBS"), currently listed at the London Stock Exchange, (12.625%, ISIN GB0006361371 and (10.75%, ISIN GB0006371529)
The two ISINs are to be CREST enabled today, 5th August 2020, and this has been introduced to ease the process for PIBS holders, in the event that they wish to transact on their holdings.
Please note there is no change to the method of the half-yearly PIBS interest payments which will continue to be paid by BACS or Cheque.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END


So what is still stopping Coventry, Leeds and Skipton from doing the same?
It cannot be beyond the ability of three of the biggest Building Societies to follow suit.

Picked up some NBSP 10.75% today at 135p [Bid/Offer 134/138p] giving a yield of 7.96%
Very small spread for these and bought at less than mid price.

At the same time the NBSR 12.625% Bid/ Offer prices are 162/171p with a quote of 170p giving a yield of 7.42%.

Another anomaly.

[OldBoyReturns]

So what is still stopping Coventry, Leeds and Skipton from doing the same?
It cannot be beyond the ability of three of the biggest Building Societies to follow suit.

Having obtained the excuses of the 3 named offending societies I spent a lot of time running around the various links in the chain (including market makers, brokers and exchange) to establish how they could easily be resolved - a la Newcastle BS as you point out.

Then I put the solution to the 3 societies, they promise to revert but then go quiet. So either they are:

1. Lazy & rude
2. Incompetent & rude
3. Devious in preferring a falsely low price so they can make a successful tender offer at a lower price if they ever get round to it. And rude.

The whole thing is a complete farce compounded by incompetent, jobsworth registrars.

Rant over.

If the UK hadn't left the EU it would be a legal requirement to dematerialise the PIBS. The UK Taskforce established after Brexit to decide what to do has recommended that Gov't introduces legislation to require dematerialisation but no timetable as yet.

[Borderline]

Thanks OBR for the update and persisting with this despite the obvious frustration.
I can’t help feeling these 3 tardy Building Societies could easily sort this if they so wished.

There is a line in the Newcastle RNS:
“this has been introduced to ease the process for PIBS holders, in the event that they wish to transact on their holdings”.

So the Pibs either fall into the “couldn’t be [expletive deleted]” category or they have some other agenda.
At the moment there is a false/distorted/unbalanced market in Building Society Pibs with some tradeable easily online via HL, AJ Bell, II etc and others only through full service brokers on vellum.

To vent my own frustration I’ll send my thoughts on the matter to all 3 and the FCA.

All the best

[bruncher]

Do we need a co-ordinated campaign? I wonder of financial journalists are aware of the issue?

[OldBoyReturns]

Coincidentally, having chased again, I have just had a long overdue reply from Skipton. Unbelievably it states:

Following our review, we determined that current arrangements are satisfactory and meet the requirements for the Society, and notwithstanding your request, the majority of PIBS holders.

I cannot believe there is a single PIBS holder who, if asked, would agree with this statement so I have no clue how it was determined.

So the more who tell them otherwise the better.

[Holts]

Coincidentally, having chased again, I have just had a long overdue reply from Skipton. Unbelievably it states:

Following our review, we determined that current arrangements are satisfactory and meet the requirements for the Society, and notwithstanding your request, the majority of PIBS holders.

I cannot believe there is a single PIBS holder who, if asked, would agree with this statement so I have no clue how it was determined.

So the more who tell them otherwise the better.

That’s nonsense from Skipton , I had a good response from their Treasury years ago who seemed to have no idea their PIBS were not easy to trade and took action to resolve the issue . However of course they came back a few months later noting there was difficulty settling and putting us back to square one .

So they appreciated the needs of PIBS holders then and seem to have changed their tune .

It clearly needs as many of us possible to contact them to enlighten.

[88V8]

That’s nonsense from Skipton....
It clearly needs as many of us possible to contact them to enlighten.

Just to play devil's advocate, what's in it for them?

V8

[OldBoyReturns]

That’s nonsense from Skipton....
It clearly needs as many of us possible to contact them to enlighten.

Just to play devil's advocate, what's in it for them?

V8

In what sense?

In terms of why do it:
- dematerialised with electronic settlement = more efficient so less cost for issuer going forward
- will have to do it anyway due to proposed UK legislation to require dematerialisation. Previously bound by existing EU legislation requiring dematerialisation which dropped away with Brexit
- not skating on thin ice with obligation under LSE rules to maintain efficient settlement
- not increasingly hacking off a broad church of PIBS holders, brokers, market makers etc

In terms of why not do it:
- distorted, restricted access, illiquid market artificially suppresses market price so level at which tender offer could be pitched

[Borderline]

Can I also add it can make things difficult if you are a holder [I have Leeds and Skipton] and want to move to a different Investment Platform.
My transfer from Barclays Smartinvestor to HL was delayed by 6 months while they tried to figure out how to deal with the Leeds Pibs.
6 months of being driven nuts. They wouldn’t even allow me to sell them.
It was like they were having to deal with engraved slabs of stone instead of an easily transferable share.
So now I am somewhat tied to HL. They will allow me to sell them but then I wouldn’t be able to buy them back.

I now have a case number from the FCA for my complaint.

[Rhinocol]

Agree with all the above. I have Leeds, Coventry, and Skipton Pibs. Tried to move this stock from Interactive Investor to London South East (Jarvis) earlier in the year. Unable to transfer and unfortunately had to give up on the Transfer. Would love to see these Building Societies pull their finger out

[bruncher]

Coincidentally, having chased again, I have just had a long overdue reply from Skipton. Unbelievably it states:

Following our review, we determined that current arrangements are satisfactory and meet the requirements for the Society, and notwithstanding your request, the majority of PIBS holders.

I cannot believe there is a single PIBS holder who, if asked, would agree with this statement so I have no clue how it was determined.

So the more who tell them otherwise the better.

This is what Skipton told me three years ago:

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.

When I queried this, there was a further reply

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.

[OldBoyReturns]

Can I also add it can make things difficult if you are a holder [I have Leeds and Skipton] and want to move to a different Investment Platform.
My transfer from Barclays Smartinvestor to HL was delayed by 6 months while they tried to figure out how to deal with the Leeds Pibs.
6 months of being driven nuts. They wouldn’t even allow me to sell them.
It was like they were having to deal with engraved slabs of stone instead of an easily transferable share.
So now I am somewhat tied to HL. They will allow me to sell them but then I wouldn’t be able to buy them back.

I now have a case number from the FCA for my complaint.

This is a huge problem for holders of PIBS which are not settled electronically in CREST. Many retail brokers, including HL, will not accept transfers in which causes big delays in ISA and SIPP transfers and results in partial transfers with the certificated PIBS being left in zombie a zombie ISA or SIPP with the old provider and customers incurring charges on two accounts.

[OldBoyReturns]

I have followed up with Skipton to try to get a more constructive and positive response. In the meantime I would encourage all concerned holders to make their own representations to Skipton BS Treasury Investor Relations contacts. Details at:

https://www.skipton.co.uk/investorrelations

Also to the London Stock Exchange at primarymarketregulation@lseg.com

If that does not get a result the most efficient approach is usually through the Trustee. I obtained the Trust deed from Skipton and that lists a Trustee company which has been dormant for many years. So I am now trying to establish whether there is a replacement and, if so, who ...

I have also written again to Leeds and Coventry for updates on their work on this issue,

[bruncher]

Coincidentally, having chased again, I have just had a long overdue reply from Skipton. Unbelievably it states:



I cannot believe there is a single PIBS holder who, if asked, would agree with this statement so I have no clue how it was determined.

So the more who tell them otherwise the better.

This is what Skipton told me three years ago:

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.

When I queried this, there was a further reply

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.

Before I write again to Skipton or FCA, please can someone assure me that there is no validity whatsoever in Skipton's claim (see para above) that the PIB's being available only in blocks of 1,000 is a genuine impediment to electronic settlement.

[OldBoyReturns]

Before I write again to Skipton or FCA, please can someone assure me that there is no validity whatsoever in Skipton's claim (see para above) that the PIB's being available only in blocks of 1,000 is a genuine impediment to electronic settlement.

I have been through it with the key parties and am assured it is not a problem provided the units are set up correctly and consistently in CREST and Registrars system. This finding is supported by the fact that other PIBS characteristic (ie each PIBS denomination is more than £1) such as Newcastle, Nottingham & Nationwide BS are settled in CREST without a problem. As are Skipton own 8.5% PIBS which are in denominations of £2,500 per PIBS !

[Borderline]

Have received a reply from the FCA which reads like it was written by chatgpt but lower down the reply was this:

“Generally speaking the activity of issuing permanent interest bearing shares by an building society would fall outside of our scope of regulation. It would be ultimately a commercial decision for a building society to make themselves in respect of whether their permanent interest bearing shares being traded on CREST.”

They did, however, pass on the details of who to contact at the three societies:

Phone: 08001218899
Email: service@thecoventry.co.uk
Address: Coventry House, Harry Weston Road, Binley, Coventry, West Midlands, CV3 2TQ

Contact name: Parveen Kaur               
Phone: 03450502252
Email: complaints@leedsbuildingsociety.co.uk
Address: 26 Sovereign Street, Leeds, West Yorkshire, LS1 4BJ

Contact name: Hayley McGee              
Phone: 01756705000
Email: customerservicemanager@skipton.co.uk
Address: The Bailey, Skipton, North Yorkshire, BD23 1DN

One can but try.

[bruncher]

Have received a reply from the FCA which reads like it was written by chatgpt but lower down the reply was this:

“Generally speaking the activity of issuing permanent interest bearing shares by an building society would fall outside of our scope of regulation. It would be ultimately a commercial decision for a building society to make themselves in respect of whether their permanent interest bearing shares being traded on CREST.”

They did, however, pass on the details of who to contact at the three societies:

Phone: 08001218899
Email: service@thecoventry.co.uk
Address: Coventry House, Harry Weston Road, Binley, Coventry, West Midlands, CV3 2TQ

Contact name: Parveen Kaur               
Phone: 03450502252
Email: complaints@leedsbuildingsociety.co.uk
Address: 26 Sovereign Street, Leeds, West Yorkshire, LS1 4BJ

Contact name: Hayley McGee              
Phone: 01756705000
Email: customerservicemanager@skipton.co.uk
Address: The Bailey, Skipton, North Yorkshire, BD23 1DN

One can but try.

'Generally speaking' we're not interested, unless someone has leverage with us.

[OldBoyReturns]

Have received a reply from the FCA which reads like it was written by chatgpt but lower down the reply was this:

“Generally speaking the activity of issuing permanent interest bearing shares by an building society would fall outside of our scope of regulation. It would be ultimately a commercial decision for a building society to make themselves in respect of whether their permanent interest bearing shares being traded on CREST.”

That sounds like usual FCA Contact Centre boiler plate. Try the FCA UKLA market integrity team at:

primary.market.integrity@fca.org.uk

Maybe include something like "failure to maintain efficient settlement (an obligation under LSE rules) is causing considerable consumer detriment and a false and distorted market in the PIBS which needs to be rectified as a matter of urgency" plus details of how else it specifically causes you detriment.

[Holts]

Holding reply to my letter .

Good morning,

Thank you for your email, my colleague has been investigating the matter but they are currently away on annual leave and as such I would like to pick this up with them on their return. We will look to reply as soon as possible.

Kind regards


Capital Markets Lead .

[OldBoyReturns]

I have received a more promising response to my follow up from Coventry BS so looks like progress there.

And another holding response from Leeds BS.

So only Skipton BS clearly on the naughty step still.