Beaufort Client Campaign: Update 3

We are delighted to announce that PwC and the FSCS have substantially improved the plan for returning assets to clients of Beaufort Securities. Details of the new proposals can be found here:

Whereas the original plan stated that the administration may take up to four years and that 700 accounts with a value > £150,000 could suffer losses of up to 40%, in order to fund administration costs PwC now state: “Fewer than ten retail clients will face any costs exposure at all.” and that they intend to effect a “block transfer of the majority of clients to a nominated broker in September.”

This comes after considerable hard work by the ShareSoc Beaufort team and by members of the creditors’ committee, to convince PwC, the FCA, and the FSCS that the original proposals were unacceptable.

There is still work to do, particularly with ensuring an efficient return of client money, as well as securities. Due to an anomaly in the Special Administration Rules (SARs), money is treated differently to client securities.

The  creditors’ committee, in collaboration with the FSCS will also continue to work to ensure that the costs of the administration (of which at least 94% will be borne by the FSCS, according to PwC’s latest statement) are minimised and come in substantially below the latest £55m maximum suggested by PwC.

We will also continue working for legislative change, namely a root and branch review of the SARs, such that the FSCS takes responsibility for the costs of Special Administrations, from the outset, and that the treatment of client money is rationalised. In addition, the actions of the FCA in this affair need to be reviewed and, if deemed appropriate, they should be censured.

Note that the FSCS is funded by a levy on financial institutions, and not by the taxpayer. However, that means that those costs are ultimately borne by the institutions’ clients, through higher charges.

We want to ensure that a situation like this can never arise again and UK investors can feel confident that client assets segregated in the manner specified by the FCA cannot be raided to fund the costs of winding up the custodian of those assets and of returning the assets to their rightful owners.

Mark Bentley

Director, ShareSoc