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FCS Deposit Guarantee

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TUK020
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FCS Deposit Guarantee

#189205

Postby TUK020 » December 24th, 2018, 6:23 pm

I had read a number of posts about the FCS deposit guarantee of £85k, and its applicability to broker accounts, the desirability of crest accounts, and this has got me a little worried.

My understanding is that with my SIPP account at HL, or my ISA account at II, the share s I hold are in a nominee account, but are my property. HL are holding them on my behalf, they do not own them. If HL go bust, their creditors do not have a claim on my assets. It might take a while to disentangle things, but I will get my assets back. (Fraud might be a different case).
The cash held in the account is different, in that it is on deposit with a financial institution, and this is the portion covered by FCS guarantee.

Have I go this wrong?
tuk020

mc2fool
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Re: FCS Deposit Guarantee

#189223

Postby mc2fool » December 24th, 2018, 7:41 pm

TUK020 wrote:My understanding is that with my SIPP account at HL, or my ISA account at II, the share s I hold are in a nominee account, but are my property. HL are holding them on my behalf, they do not own them. If HL go bust, their creditors do not have a claim on my assets. It might take a while to disentangle things, but I will get my assets back. (Fraud might be a different case).

Fraud, incompetence, human, computer or systemic cockups, etc, etc. The broker (actually their nominee) is the legal title owner and you are the beneficial owner. https://en.wikipedia.org/wiki/Beneficial_owner

The broker's creditors won't have a claim on them but the administrator/liquidator may. See the case of Beaufort Securities. https://www.google.com/search?q=Beaufort+Securities+clients+clashes+with+PwC

The cash held in the account is different, in that it is on deposit with a financial institution, and this is the portion covered by FCS guarantee.

Assuming the broker has played by the rules, and there isn't fraud, incompetence, human, computer or systemic cockups, etc, etc, then cash should be spread amongst at least five deposit taking institutions, and the FSCS £85K applies to each but subject to all your other deposits with those institutions.

See my recent exchange with IWeb on exactly this matter, viewtopic.php?f=26&t=13044&p=157506 (read all my posts to get the full exchange).

TUK020
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Re: FCS Deposit Guarantee

#189244

Postby TUK020 » December 24th, 2018, 9:54 pm

Thanks for the explanation. Still not sure how worried I ought to be.

GeoffF100
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Re: FCS Deposit Guarantee

#189345

Postby GeoffF100 » December 26th, 2018, 1:34 pm

DEPOSITS of up £85K are protected in full.

For investments, you are indemnified for a LOSS up to £50K. If there was a 10% loss due to fraud on a £500K investment, you would be covered. I do not know of any case where anybody has not eventually been compensated in full, but there is always a first time. If you stick to big online brokers, you should be OK, but I would go for the financially soundest ones.

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Re: FCS Deposit Guarantee

#189368

Postby TUK020 » December 26th, 2018, 4:19 pm

So for a SIPP with Hargreaves Landsdown, and an ISA with Interactive Investor?

mc2fool
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Re: FCS Deposit Guarantee

#189373

Postby mc2fool » December 26th, 2018, 5:02 pm

GeoffF100 wrote:I do not know of any case where anybody has not eventually been compensated in full, but there is always a first time. If you stick to big online brokers, you should be OK, but I would go for the financially soundest ones.

Pacific Continental Securities and Strand Capital Limited. viewtopic.php?f=26&t=6286&p=67057. There's always a third time. :D

I'd agree with your last sentence, expect that when you consider Barings to Lehmans to RBS I don't know how to be confident about which are "the financially soundest ones".

GeoffF100
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Re: FCS Deposit Guarantee

#189376

Postby GeoffF100 » December 26th, 2018, 6:03 pm

mc2fool wrote:
GeoffF100 wrote:I do not know of any case where anybody has not eventually been compensated in full, but there is always a first time. If you stick to big online brokers, you should be OK, but I would go for the financially soundest ones.

Pacific Continental Securities and Strand Capital Limited. viewtopic.php?f=26&t=6286&p=67057. There's always a third time. :D

I'd agree with your last sentence, expect that when you consider Barings to Lehmans to RBS I don't know how to be confident about which are "the financially soundest ones".

Yes, if you had picked obviously dodgy brokers, you could have lost money. I think you would have been OK with money in a broker account with any of Barings, Lehmans or RBS.

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Re: FCS Deposit Guarantee

#189383

Postby mc2fool » December 26th, 2018, 6:35 pm

GeoffF100 wrote:
mc2fool wrote:I'd agree with your last sentence, expect that when you consider Barings to Lehmans to RBS I don't know how to be confident about which are "the financially soundest ones".

Yes, if you had picked obviously dodgy brokers, you could have lost money. I think you would have been OK with money in a broker account with any of Barings, Lehmans or RBS.

Maybe so, but yet Barings, Lehmans and RBS clearly weren't financially sound in the end. Avoiding "obviously" dodgy brokers is one thing, but as events have shown, the contrary is more problematic as unexpected things can occur out of the blue.

I agree that going for the larger players -- and esp. those part of an even larger institution -- is the way to go, but we shouldn't think any broker is totally zero risk....

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Re: FCS Deposit Guarantee

#206575

Postby ron505 » March 9th, 2019, 8:08 am

From the FCA website:

The use of nominees allows a firm to hold clients’ assets in such a way that they are ring-fenced from the firm’s own assets, and firms are required to maintain appropriate books and records to clearly identify which assets are held for which client. There are a number of advantages both to firms and clients from holding custody assets in this way, including reduced costs to clients.


Your shares aren't at risk in an insolvency (unless there has been some illegal misappropriation of your assets). In my understanding of the Beaufort Securities case a very small number of large investors had to contribute towards the costs of the administrator dealing with the assets (i.e. moving them to another provider).


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