The Financial Services Compensation Scheme says it does more than just compensate people, with Beaufort Securities a good example of where it also provides continuity for clients.
FSCS chief executive, Mark Neale (pictured), says it is wrong to assume all the FSCS does is judge compensation claims against failed firms and pay out accordingly. Writing in a blog on the FSCS website, Neale points out an important part of the work of the lifeboat fund is to make sure a service can be maintained for clients of collapsed firms.
He uses the incident in which UK stockbroker Beaufort Securities collapsed earlier this year as an example:
“As a result of our engagement with the special administrators, PwC, and as a member of the creditors’ committee, were able to ensure that the great majority of Beaufort’s clients would be compensated in full for [the costs of returning client money and assets.]
“Our protection, however, ultimately went well beyond that. Working with PwC, we were able to arrange for the transfer of the money and assets belonging to 12,000 clients to another nominated broker, The Share Centre Limited.
“This means that the clients concerned will now be able to continue to manage their investments.”
The case of Beaufort Securities garnered a great deal of attention from the financial services and press not only due to the £550m that was due to be returned to clients but also the fact PwC said it could have to use up to £100m of client money to pay for the cost of doing so.
Neale says the FSCS has successfully delivered automatic compensation to many clients this year:
“Our protection for savers in failed, banks, building societies and credit unions is a good example of automatic compensation. Thanks to the Single Customer View files maintained by all deposit-takers, FSCS is able to return people’s savings in seven days – usually faster. We have achieved this with nine credit unions already this year.”
But he says continuity comes not just from compensation but from cooperating with other market actors, such as with the Share Centre Limited, in the case of Beaufort Securities clients, or with a Lloyds of London syndicate who took over 177,000 protection policies after Danish company Alpha Insurance Company collapsed in May.