If Your Stockbroker Fails, What Will You Lose?

If Your Stockbroker Fails, What Will You Lose?
Underwater by Andy Deitsch. Why?

Following the collapse of stockbroker Beaufort, it might well pay you to diversify your money across various funds and several stockbrokers, for it appears your money may not be as safe as you think.

The Shock News Is That Beaufort's Failure Could See Some Investors Lose Up To 40 Per Cent Of Their Money, Even Though It Was Ring-Fenced!

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Earlier this year, collapsed UK stockbroker Beaufort Securities Ltd and its sister company Beaufort Asset Clearing Services Ltd were shut down by the Financial Conduct Authority, having been declared insolvent. 

The regulator appointed accountancy firm PwC, the one famous for the Oscar ‘Best Picture’ cock-up, to be the administrator. 

PwC has announced it could cost as much as £100 million to return the cash and assets held by the company to around 14,000 of Beaufort's private investors.

Around 700 clients with portfolios worth more than £150,000 are expected to bear much of the cost, with early estimates suggesting they could lose up to 40 per cent of their money.

PwC has written to clients indicating it's secured money in segregated client money accounts and client securities.  It's also confirmed the monies and securities were held appropriately in accordance with regulatory requirements.

Here’s The Sting!

PwC informed clients that because there was no surplus of funds within the firms’ segregated resources, the £100 million of costs would be deducted from clients’ entitlements to client money and client assets ...


In an article in the FT entitled PwC defends Beaufort Securities insolvency plan, joint administrator and PwC partner Russell Downs said:

In the absence of any other available resources . . . the overall costs of delivering [returns] to clients has to be shared appropriately by those to whom the assets belong.  I don’t think there’s an easy alternative but to carry on with the administration.

For £100 million, of course he'd say that!

It’s angered many Beaufort clients, as well as others concerned about the wider implications.

Lord Lee of Trafford, acknowledged as being Britain’s first ISA millionaire by compounding savings of just £126,000, has tabled a question in the House of Lords.  He also told the FT:

Everyone is of the view — including me — that client funds are ring-fenced and protected, and no one can put their hands in and dip into them.  That’s the whole thrust of what the government has been trying to create to give protections to . . . individual savers.  What it does is raise the question of the whole principle of actually dealing with small and medium-size stockbrokers.

The ramifications of this are reverberating well beyond Beaufort. 

Beaufort Client Campaign

Beaufort's failure has motivated the not-for-profit organisation, ShareSoc (the UK Individual Shareholders Society), to launch a campaign to ensure that ring-fenced assets are protected from raids by administrators. 

Its campaign is introduced as follows:

ShareSoc is appalled by the treatment of Beaufort client assets proposed by administrator PWC and the huge fees PWC intends to charge for their services.  We have therefore launched this campaign, seeking to minimise the losses suffered by Beaufort clients and to minimise the time before clients regain access to their securities held by Beaufort.  In addition we seek to protect the interests of all UK investors by improving the regulatory framework, so that client assets which are supposedly ring-fenced are protected from a legalised raid by administrators.

The campaign is open to Beaufort clients and anyone who has an interest in stockmarket investments. 

If that’s you, take a few moments to read about the Beaufort Client Campaign, then join forces to help close this loophole.

For next time, it could be your money at risk!


BREAKING NEWS: PwC Slashes Costs by £45 Million Under Investor Pressure!

The campaign has won its first success, but costs could fall much further.  More importantly, legislation needs to change for your protection.  If you hold any stockmarket assets, please write to your MP now using this template letter.

If You're Interested In Stockmarket Investment, Join ShareSoc For Free

ShareSoc is dedicated to the support of individual investors.  Its aim is to make and keep you better informed so as to improve your investment skills, and protect the value of your investments.  It won’t shirk from tackling companies, the Government or other institutions if it thinks you're not being treated fairly, as evidenced by the Beaufort Client Campaign above.  The benefits of free membership are:

  • Monthly "Informer" electronic newsletter
  • Access to experienced investment experts
  • Participation in private investor campaigns
  • Networking opportunities with fellow investors
  • Access to investor resources on web site including: investor educational pages, links to "useful services for investors", recommended reading list for investors and AIM company evaluation scorecard
  • Opportunities to participate in working groups and consultations

Full membership is available for less than 90 pence a week, giving you substantially more benefits.

Join ShareSoc For Free Now

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