This campaign is now closed as its principal objectives have been achieved with assets restored in full to almost all Beaufort clients. ShareSoc will consider whether to launch a further campaign to address the broader issue of the inefficient operation of the Special Administration Regime.
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 ringfenced are protected from a legalised raid by administrators.
Presentation on the Campaign
Mark Bentley presents on our Beaufort Client Campaign:
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Injustice for Beaufort Clients
The Financial Conduct Authority (FCA) declared Beaufort Securities Limited (BSL) and sister company Beaufort Asset Clearing Services Limited (BACSL) insolvent on the 2nd March 2018. The high court appointed Russell Downs, Douglas Nigel Rackham and Dan Yoram Schwarzmann of PricewaterhouseCoopers (PwC) as joint administrators of BSL and special administrators of BACSL.
Following an assessment of the financial positions of BSL and BACSL led the FCA to believe that both firms are insolvent and the FCA considered it necessary for insolvency practitioners to take over the running of the firms in order to protect assets from dissipation and protect the customers of both firms.
On 15th March, in a letter to clients, PwC mentioned that they had safeguarded the Firms’ IT and data systems as well as securing approximately £50million in segregated client money accounts and approximately £850million in client securities. PwC also confirmed that the monies and securities that were secured were held appropriately in accordance with FCA requirements.
On the 12th April, in a further letter to clients, PwC noted that client money and client assets were, as at the date of administration, substantially complete save for a very small number of isolated deficiencies. Furthermore, an initial independent valuation marked down the initial value of £850 client assets down to £500m as a result of illiquid / nil value positions.
A key point to note in this letter was that due to the absence of a surplus of funds within the Firms’ segregated resources, relevant costs would be deducted from clients’ entitlements to client money and client assets.
PwC also ruled out an expedited return of assets and with the majority of returns commencing in September 2018 at the earliest. PwC also estimated that around 700 clients with assets valued over £150,000 may experience a loss up-to a maximum of 40%. How is a hair-cut of 40% on ring-fenced assets fair?
Another key point to note here is that The FCA kept Beaufort Securities alive so the FBI could conduct an undercover investigation putting the interests of the FBI ahead of UK residents / citizens who had saved and invested through Beaufort. It is said the FCA gave the firm a stay of execution to allow US authorities enough time to gather the evidence required to bring the charges against the broker. Does the FCA not have a duty of care first to UK residents and citizens?
The administrators also want to charge an exorbitant £100 million for the administration over a period of 4 years. Because Beaufort did follow the FCA rules on ring-fencing of assets and client money, how can costs of £100 million be justified just to transfer an electronic registry of client assets / money to another broker?
There is a meeting on the 10th May where PwC have asked clients / creditors to vote on their proposals and there is no sight of a detailed distribution plan / exact costs. How can clients make the right decision if they don’t know what they are committing to?
I, like over 14,000 others, invested through Beaufort Securities only because of the assurance that assets / money are ring-fenced as per FCA rules. The whole notion of ring-fencing presumably is to protect client assets / money in such an event. The fact that PwC can dip into client assets / money means that savings and investments are not as safe as the FCA would have you think, even in a regulated entity. The liquidator’s proposals, which would breach the safety of ring-fenced assets, bring into question the whole system of regulatory and legal protection of investors in the UK. This has serious implications for all investors, whether you were a Beaufort client or not.
I strongly appeal to all investors to join this campaign and encourage other clients who have significant sums in Beaufort Securities to come together as soon as possible for a collective response on this matter. If you are not a Beaufort client, your support in this campaign is even more important as it will help us to push for regulatory change at the highest levels. Please register your support below, whether you are a Beaufort client, or not.
John Lee of the FT says:
I am very happy to endorse the thrust of ShareSoc’s campaign. We were all shocked to discover the seeming vulnerability of clients’ funds when we thought that they were ring-fenced and protected. This loophole surely has to be closed.
If you are a Beaufort client with assets in excess of £150,000, it is even more important that you sign up to this campaign so that we can pool our resources, think and act together to prevent this injustice and scandal from happening!Join the campaign
Our objectives are as follows:
- Influencing the administrator through a creditors’ committee
- Monitoring and controlling the administration costs of the BACSL, which may involve a change of administrator
- Requiring that a transfer of the BACSL assets and accounts to another broker be properly explored
- Ensuring that the costs of the BSL liquidation are kept entirely separate and are not charged to BACSL
- Challenging the basis of the apportionment of costs among BACSL clients
- Reviewing the actions and motivations of the FCA in this matter
- Looking to have the 2011 Special Administration Rules reviewed to better protect the interests of investors
Update 1 10th May 2018 – Campaign Progress and Voting Recommendations: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-1/
Update 2 19th May 2018 – Outcome of PwC client and creditors’ meeting, including detailed meeting notes: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-2/
Update 3 10th June 2018 – Much improved distribution plan announced: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-3/
Update 4 10th August 2018 – Important progress for Beaufort clients and a ministerial meeting: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-4/
Update 5 8th March 2019 – work continues: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-5/
Joining the Campaign
Please note that you can join this campaign, whether or not you are a Beaufort client, as the issues it raises affect all UK investors. If you would like to support our campaign to defend your interests, please complete the form below. In order to maximise the chances of a successful campaign, we need to take legal advice on how to challenge the administration, and may need to initiate litigation to make an effective challenge. ShareSoc is a not-for-profit entity, and is not able to finance this from our existing limited funds. We are therefore establishing a “fighting fund” to enable us to do this. The fund will be used primarily to finance professional work undertaken to further the campaign’s ends and also for any incidental expenses incurred by the campaign. Should the balance of the fund exceed our needs for this campaign, we will use that balance to further ShareSoc’s aims, including our shareholder rights campaign, which is aimed at changing custody arrangements in the UK, so that securities are directly registered in the names of their beneficial owners. As well as minimising the impact of a broker failure, such as Beaufort’s, this brings numerous other benefits for shareholders.
Neither the campaign co-ordinator, nor any ShareSoc directors will receive any remuneration for their work on this campaign. If you are prepared to contribute, please tick the box “Donate” to enable our secure Stripe facility for accepting electronic payments. Alternatively, you can send a cheque, made out to “ShareSoc”, to our office at this address:
ShareSoc, Suite 34, 5 Liberty Square, Kings Hill, WEST MALLING ME19 4AU
Please complete the form below, print it out and send it with your cheque, marking the back of the cheque “Beaufort Fighting Fund”.
Full members of ShareSoc can discuss this campaign in our discussion forums.
If you have assets exceeding £150,000 held with Beaufort, please tick the box marked “Large Beaufort Client”. In that circumstance PWC’s current proposal implies that you will suffer a disproportionate loss, and joining and supporting our campaign will be particularly important to defend your interests. We will keep you apprised of any issues particularly affecting clients with large accounts.
If you are not yet a member of ShareSoc, ticking the box “ShareSoc Membership” will grant you FREE associate membership of ShareSoc, bringing you the benefits described here. Alternatively, if you wish to support us further and gain additional membership benefits, you can join as a full member here, for less than 90p per week.
If you have any questions concerning this campaign, please do not hesitate to contact us.
Beaufort Client Campaign Co-ordinator