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Another FSCS adviser bill looms as scheme writes to MF Global clients

Mark Neale
Mark Neale

The Financial Services Compensation Scheme is to send MF Global UK customers application forms for compensation in a move that is likely to trigger another large FSCS bill for advisers.

The UK subsidiary of the failed investment brokerage was placed into special administration in October and is classed by the FSCS as in the investment intermediation sub-class which advisers would have to pay claims for, according to a list acquired by Money Marketing through the Freedom of Information Act.

The FSCS has worked with the FSA and administrators KPMG to “understand the potential impact on customers”. According to the FSCS, some customers may have eligible claims.

Mark Neale, chief executive of the FSCS, says: “We are very close to being in a position to start sending application forms to relevant retail customers of MF Global who may have claims.

“Once customers receive their application form from us, we ask that they complete it and return it as soon as possible.”

The FSCS is also encouraging customers to respond to client and creditor claim forms sent by KPMG, as it will not affect the ability to apply to the FSCS.

New York-based MF Global Holdings, which owns the broker-dealer, collapsed on October 31 after $6.3 billion exposure to eurozone debt failed to pay off. Jon Corzine, its chief executive, resigned on November 4.

James Giddens, the trustee overseeing the company’s bankruptcy, estimates that there could be up to $1.2 billion (£760m) in missing funds when the case is wrapped up. No estimates have been given as to the potential losses of clients in its UK subsidiary.


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There are 16 comments at the moment, we would love to hear your opinion too.

  1. The financial services industry is determined to eat itself.

  2. Excellent news, we’ll look forward to that. Splendid.

  3. Not eat itself but gobble up and discharge all those it can make pay for it’s failures

  4. Is it not about time financial advisers said “No – we’re not playing this game any more”.

    Either a fund/manager is fraudulent or not. In the former – is that not what the FSA is supposed to pick up? If they’re not fraudulent and just incompetent at running a business – is that not what the FSA is supposed to pick up?

    If it’s just crap fund performance – caveat emptor you walked into it with your, usually greedy, eyes open – tough.

    Is there a solution? I bet if, on a rotating basis, no business was submitted to the big players in the market things would change pretty damn quick.

  5. Wheatley IFA Limited 9th December 2011 at 1:02 pm

    So, yet again the ones who are not responsible end up paying for it. There is something ethically and morally wrong with how this industry apportions redress. It is completely obvious that the rules do not meet the fit and proper ideals that the regulator sets.

    If Tesco had to compensate 5000 customers for wrong doing does it mean that Asda, Sainsbury’s and the like have to put their hand in their pockets?

  6. Plenty of advisers are already saying No we’re not playing this game any more, hence there are already 8% less IFA’s now than there were a year ago. But, if you say No, we’re not playing this game any more, you’ll have to accept that you’ll have to quit the game altogether, because the terms of all demands from the FSA, the FoS, the FSCS and the MAS are all pay up or pack up.

    That having said, the FSA and the FSCS have failed even to try to explain how, unless misappropriation of client monies has occurred which, let us not forget, would be a criminal offence, the failure of an intermediary can involve client losses. Surely, clients lose money only when a provider goes down?

    This seems to be yet another mechanism with which to skewer the already hard pressed IFA sector.

  7. Don’t know about ‘last one out switch the lights off’ – but last one standing is going to have one hell of a FSCS levy to pay!!

  8. The scale of the MF Global losses are raising an eyebrow even in the USA where the assumption was that client money was ring fenced. It wasn’t, due to a process called ‘hypothecation’, yet another method whereby financial institutions turn your money into their money which then disappears.

    Why does this matter to us – how big could their UK business be? Try 100% of the losses. Why – because every MF Global client had a UK account because the UK rules on Hypothecation are ‘lax’.

    So does this mean that UK advisers will be paying compensation to USA investors – that’s the implication of this mess!

  9. This is getting beyond a joke. The FSA and its cohorts the FSCS, FOS, MAS are screwing us to the wall. I still do not think they understand being in business at all. In addition to the above there are other on costs, offices, utility bill, staff,
    PI cost Data protection OFT costs, the FSA are trying to take our income from us in the form of trail commission, ordinary commissions etc. Its not Einstein to work out if you are squeezed from the top and the bottom, the middle collapses. Apart from this it is morally wrong that we should pay for other peoples errors( i use the word error)to be polite. Thats my rant for this week, I cannot wait for next week

  10. right on stanley and this is one of the things that cameron exercised the veto on so as to enable the city to keep on doing it

  11. Glad to see that our regulators or so on-the-ball. Could someone please tell me this article (url below) is inaccurate. If not, the question of compensation to a few UK investors is irrelevant.

  12. Ian

    ZH does go for the senstational, however London is far less regulated in this area and as I said earlier this is something Cameron wants to retain

  13. The story in the link accords with that from Reuters at this Link;

    Read in particular the section headed BEWARE THE BRITS.

  14. I really just cannot understand some of the commenters on the other article cheering on Cameron for standing up for the UK.

    What they fail to realise is that Cameron is standing up for the maintenance of the financial status quo. Ever notice while Germany forces its banksters to hand back their bonuses or Ireland bankrupts them, Goodwin, for example, still keeps his knighthood? So we know whose side Dave is really on and it is not with the people on the other page.

    Instead of bothering to read hogwash on why Japan is the place to be (the maths say otherwise) you would be better off educating yourself with the research of others who saw the current depression coming (and made their millions in doing so to their credit) and see just how bad things are going to get from now on.

    It will be well worth your time to spend an hour with Kyle Bass

  15. I said about a year ago that being an IFA will in effect be like a “lloyds Name” with unlimited liabilities for other peoples mistakes/frauds/accounting errors/poor decisions but without any upside.
    When IFA numbers have dropped by 30% post RDR and another 30% post 2014 the numbers left will have to to pick up the ever increasing FSCS tab.
    We only need an insurance company to fail and we will all be BUST.

  16. It’s funny isn’t it, Transact have a technical issue with client money, lose no clients money and get fined 3.5 Million are queoted on the front page of the FSAs website, while MF Global loose over a $Billion, which we are told is in the intermediation sector and NOT investment sector have stayed within the rules (allegedley) and as a result there is NO mention of it on the FSAs website, just on the FSCS website.
    Surely there should be seperate FSCS levy pools for authorised to handle client monies and NOt authorised to handle client monies….?
    As to who pays, we a re a limited company, so if our levy is too big as a result of this latest collapse I think we may just have to decide to go “non regulated” and complete directly with the MAS service and mention no product/product providers. Those firms who are sole traders or partnerships are actually liable personally for the MF Global debt and can only close their business with the FSA’s permision, if they don’t give permission, they can keep after you for it as an individual. Asa ltd company, if they don’t give you permission to cease to trade, then all they can take is your capital adequacy and remove your “fit and proper”

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