In private investor circles, the main talking point this year has been the scandal surrounding Beaufort Securities. It has left many investors asking the question “who does the money in my investment account really belong to?”
Background to the Beaufort Securities Scandal
On 2 March 2018, the Financial Conduct Authority (FCA) declared Beaufort Securities Limited (BSL) and sister company Beaufort Asset Clearing Services Limited (BACSL) insolvent. Following this, PricewaterhouseCoopers (PwC) were appointed as administrators.
PwC have estimated that it’s fees for administration would be in the region of £50million to £100 million. This amount is truly astonishing. But that is not the scandal here. The scandal is that PwC want to take these fees out of client money held in ‘ring-fenced’ accounts.
PwC will essentially use clients hard earn money to pay themselves an administrative charge.
It is estimated that clients with portfolios in excess of £150,000 could lose up to 40% of their assets! Even those who’s portfolio levels are below this amount are likely to lose money. The only saving grace is for investors who’s portfolios are worth less than £50,000 as this is the amount covered by the Financial Services Compensation Scheme (FSCS).
The taking of client money is all possible because of Rule 135 of the Investment Bank Special Administration Rules (England and Wales) 2011. This rule allows administrators to use client shares / assets to fund the administration on the collapse of a stock broker or wealth management firm.
So if you thought your funds would be safe because they are in a ‘ring-fenced’ ISA, SIPP or share dealing account, you are wrong. As a result of this, a petition has been launched to revise Rule 135.
Calling All Investors To Sign The Petition Against Administrator Fees From YOUR Accounts – Beaufort Securities
If you are currently thinking that this does not affect me..YOUR WRONG! As long as you have a brokerage account, this is of the utmost of importance to you!
There is currently a petition to Revise Rule 135 to stop administrators from taking fees out of client assets. This petition can be found here – https://petition.parliament.uk/petitions/222801.
Have a read of it and sign if appropriate. We need to get at least 10,000 signatures for a government response
What To Do In The Meantime To Protect Funds
I wouldn’t blame you if this whole episode has left you nervous about the safety of your hard earned money. The best thing to do from my perspective is to sign the above petition. In my opinion, the next best things you can do are the following:
- Ensure your portfolio is held with a company with strong finances – Platforms like Hargreaves Lansdown are constantly being derided for their above average charges. But the safety these big names provide are second to none. Always look at a brokers financial position before opening an account with them.
- Split your money across different platforms – Investors can claim from the UK’s Financial Services Compensation Scheme (FSCS) but only to a maximum value of £50,000 –https://www.fscs.org.uk/what-we-cover/compensation-limits/ Sure having money with a few different companies might cost you a little more due to platform charges, but it is is worth paying that little bit extra knowing your money is safe from one day to the next.
If you have any more suggestions on how to protect your money, please do leave a comment below.