ShareSoc demands fair treatment for Beaufort clients

Press Release 104 – ShareSoc demands fair treatment for Beaufort clients

The liquidation of Beaufort Securities on the FCA’s instruction is targeting the ring-fenced property of thousands of UK private investors, many of whom are now facing losses of up to 40% of the value of their holdings. The liquidator’s proposals bring into question the whole system of regulatory and legal protection of investors in the UK.

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 and PwC were appointed as administrators of BSL and special administrators of BACSL.

On 15th March, PwC confirmed that the ringfenced property of the Group’s clients was held appropriately in accordance with FCA requirements, being approximately £50million in segregated client money accounts and around £850million in client-owned securities. On the 12th April, 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. However, the initial estimate of £850 million client assets was reduced to £500m as a result of illiquid / nil value positions. The special administrator stated that the majority of client asset returns will commence September 2018 at the earliest and that around 700 clients with assets valued over £150,000 may experience a loss up-to a maximum of 40% on their ring-fenced assets!

PwC is proposing to charge an incredible £100 million for the wind-down over a period of 4 years. They have provided no justification of either the amount or timeframe for the simple task of transferring an electronic registry of client assets/money to one or more replacement brokers.

Over 14,000 clients invested through Beaufort Securities, an FCA regulated entity, on the assurance that their assets were firewalled per FCA rules precisely to protect them in the event of the broker’s insolvency. The suggestion that PWC as Special Administrator can seize client property and treat the owners as creditors of the failed entity makes a mockery of regulatory protections for investors in the UK.

The FCA seems to have allowed Beaufort Securities to continue trading while the FBI carried out an undercover investigation, apparently putting the interests of the FBI ahead of those of UK investors. This calls into serious doubt the FCA’s priorities and the regulator’s role in protecting domestic savers.

ShareSoc is determined to defend the interest of Beaufort clients, and the interests of UK shareholders in general, whose shares are held in nominee accounts and are therefore similarly exposed to the insolvency of their brokers.

ShareSoc has launched a campaign with the primary purposes of mounting a legal challenge to the current administration proposals, specifically:

  • Refuting the Special Administrator’s right to seize ringfenced client property
  • Ensuring proper separation of the liabilities of BSL from those of BACSL
  • Questioning the Special Administrator’s cost and time estimates in relation to the wind-down of BACSL
  • Seeking a transfer of the business of BACSL to an alternative custodian
  • Reviewing the actions and motivations of the FCA in this matter
  • Lobbying for legislative change to ensure that assets in custody are properly protected

Renowned FT writer and private investor, John Lee 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”.

Details of the campaign can be found here:
https://www.sharesoc.org/campaigns/beaufort-client-campaign/

 

Note: ShareSoc has campaigned for many years for legislative change that would result in shares being directly registered in the names of their beneficial owners, rather than via brokers’ nominee accounts. Such a system would have prevented the current attack on the private property of the Beaufort group’s clients. See our shareholder rights campaign for further information: https://www.sharesoc.org/campaigns/shareholder-rights-campaign/

Information About ShareSoc, the UK Individual Shareholders Society
ShareSoc is the UK’s largest retail shareholder organisation acting in all areas of the UK stock market more than 4000 members. ShareSoc is dedicated to the support of individual investors (private shareholders as opposed to institutional investors). We aim to make and keep investors better informed to improve their investment skills and protect the value of their investments. We won’t shirk from tackling companies, the Government or other institutions if we think individual shareholders are not being treated fairly. See www.sharesoc.org.