Beaufort Securities Limited ("BSL") in Administration & Beaufort Asset Clearing Services Limited ("BACSL") - in Special Administration ("the Firms") - Client – Frequently Asked Questions

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Questions

Answers

What is an Administration?

An administration is an insolvency procedure, where individual insolvency practitioners take charge of the company’s business and affairs with a view to pursuing certain objectives. In this instance, to oversee the orderly return of client assets and money.

 

What is the Special Administration Regime (SAR)?

The SAR, introduced by the government in 2011, helps sort out situations where investment firms, which hold clients’ money and/or assets under the FCA’s CASS rules, fail. The SAR process has several objectives, but one of these is to ensure clients’ money and assets are returned to clients as soon as is reasonably practicable.

 

What happened exactly and why was it required?

An Own Initiative Requirement (OIREQ) was imposed by the FCA to prevent the Firms’ clients from being exposed to further harm and protect the integrity of the UK financial system due to:

· the FCA’s consideration that the Firms are failing to satisfy the FCA’s threshold conditions of Appropriate resources, Suitability and Effective Supervision; and

· the DOJ’s formal accusation of BSL on 1 March 2018.

An OIREQ was imposed on both firms requiring them to cease all regulated activities and freezing their assets and any client assets held.

 

What is the difference between BSL and BACSL?

As a client making investments with Beaufort all client correspondence will have been branded as Beaufort Securities Limited. Beaufort Asset Clearing Services Limited provide the clearing and custody services to Beaufort Securities Limited.  All client money and assets were therefore held with Beaufort Asset Clearing Services Limited.

 

Were client assets ring-fenced from company assets?

The administrators have secured the company’s custody arrangements and are in the process of reconciling the assets held in these accounts.

Investors will not have access to their assets until the administrators have completed a full reconciliation and the assets are returned to the client or transferred to a new broker/custodian.

The administrators have secured both client money and client assets and believe there will be there will be a high level of recovery to clients in due course. We expect this to take a number of months to resolve as we carry out the administration process.

 

What is the current position?

A distribution plan is being developed as a matter of urgency and a realistic timeframe to commence asset returns for the majority of clients will be September 2018 at the earliest.

With a majority of clients seemingly eligible for FSCS compensation and falling within the £50,000 compensation limit, we believe the substantial majority of clients will recover the value of their portfolios in full in due course.

 

How will client assets be returned?

The administrators are assessing the client asset position of the Firms.

The joint administrators will return as much client money to clients as possible, as quickly as possible in accordance with the client money distribution rules.

A statutory “distribution plan”, designed to facilitate the return to clients of the balance of the client cash and securities held by BACSL, running alongside a process of returning remaining client assets. As it is, the administrators hope that a transfer of this nature may be achievable in September 2018 at the earliest.

 

What does the distribution plan entail?

The procedure laid down for the distribution plan entails the administrators:

· Firstly, setting a bar date for claims in respect of securities: A client portal which shows clients their entitlements according to the Firms’ books and records has been made available, please see further details here. Clients will be given a period of time to submit any corrections or other information that they consider the administrators ought to take into account, prior to the deadline.

· Secondly, preparing and circulating to clients (and the FCA, among others) a document setting out how they propose to go about returning the client securities in Beaufort Asset Clearing Services Limited’s possession.

· Thirdly, seeking and obtaining approval of the above document from the creditors’ committee: The administrators will circulate details of an initial meeting of creditors and clients of Beaufort Asset Clearing Services Limited (BACSL). One of the purposes of that meeting is to constitute a committee, made up of creditors and clients of BACSL, which can then represent the wider constituency of creditors and clients during the remaining course of the special administration. This “distribution plan” be require the approval of the creditors’ committee, prior to being put into effect.

· Fourthly, seeking and obtaining the approval of the above document from the court: It is a requirement that the “distribution plan” be approved by the court, prior to being put into effect.

Please see further details in our communication to clients dated 12th April 2018.

 

Why can’t I have my assets now?

The complexity of the situation, as well as the timeframes specified in the applicable rules and legislation (as outlined in our communication to clients dated 12th April 2018, does mean that there will be a certain amount of unavoidable delay associated with the return of cash and securities to clients.

 

Will I suffer a shortfall?

After the administrators have completed their assessment of the client money and assets position of the Firms, including by reference to responses from clients before the bar date, it will become clearer whether there are any client losses relating to client money and assets. 

As there are insufficient resources in the Firms to pay for the costs of returning client money and assets, relevant costs will need to be deducted from those monies and assets in accordance with Rule 135 of the Investment Bank Special Administration (England and Wales) Rules 2011. The basis of allocating costs is likely to be by reference to value of the client portfolio and charged on a sliding scale. 

With a majority of clients likely to be eligible for Financial Services Compensation Scheme (FSCS) compensation with shortfalls and costs falling within the £50,000 compensation limit, we believe the substantial majority of clients will recover their portfolios in full in due course.

 

Why are costs being deducted from client assets?

There are insufficient resources in the Firms to pay for the costs of returning assets to clients. Therefore these costs will need to be deducted from clients’ portfolios in accordance with Rule 135 of the Investment Bank Special Administration (England and Wales) Rules 2011. 

The administrators, working closely with the FCA and FSCS, are focused on resolving the current situation, however, this has costs associated with it. Those costs are not just in respect of their own fees, but also in respect of the 35 retained staff, legal advisors’ fees and also various third-party suppliers to the Special Administration, such as IT services providers, telephony providers, electricity providers, landlords, and others. The administrators have materially reduced the scale of the Firms’ operations, maintaining all and only critical operations in order to facilitate the return of client money and assets.

What has driven the change in the estimate of the costs of the administration to £55m?

The original cost estimate provided was very conservative and built around assumptions of significant claims disputes, significant compliance issues and, consequently, investigations and regulatory issues impacting the speed at which client assets could be returned. We have now determined that a more likely outcome is a faster resolution at a reduced cost, based on our greater understanding of the assets and the initial responses we are receiving from clients in relation to the portal. In particular we are assuming the distribution plan will be agreed in time for the majority of client positions to be transferred to a nominated broker in September

Our revised estimate has been provided as guidance for clients, there may still be unforeseen issues that cause this figure to increase. However it is still designed to be prudent and whatever reserve is agreed as part of the distribution plan will be set envisaging that ultimately an element will not be required and can be refunded.

Am I entitled to compensation?

The administrators have worked closely with the Financial Services Compensation Scheme (FSCS) and have confirmed that, where eligible clients have client money and assets held with Beaufort Asset Clearing Services Limited (BACSL) with a shortfall of up to a value of £50,000, such clients will have their shortfalls made good by the FSCS.

The Financial Services Compensation Scheme (FSCS) states that the maximum level of compensation for claims is £50,000 per person per firm. You can check their website (www.fscs.org.uk) for further information about what is covered. We are currently liaising with them and further guidance will be available in due course.

I held a joint account with my partner through Beaufort. Are we able to claim for any losses through the FSCS individually or are we limited to claiming up to £50,000 in total between us?

The Financial Services Compensation Scheme (FSCS) states that the maximum level of compensation for claims is £50,000 per person per firm. Therefore, as joint account holders you and your partner would be entitled to make separate claims for up to £50,000 each as individuals. You can check their website (www.fscs.org.uk) for further information about what is covered. We are currently liaising with them and further guidance will be available in due course.

 

Can I transfer my ISA?

As soon as any client money and client assets are ready to be returned to you, you should be able to validly transfer your ISAs to another account manager, but only after the  administrators have quantified all of the assets held by Beaufort Asset Clearing Services Limited, and the Financial Conduct Authority have authorised the transfer of such assets. Further information will be provided shortly.

 

Can I open an ISA with another provider?

You should be able to open and pay into a new ISA for the 2018/2019 Tax Year with a different ISA manager subject to your individual circumstances. However, it is recommended that you seek independent advice where required.

 

Have HMRC been notified about the situation?

Yes. Beaufort Asset Clearing Services Limited (BACSL) ceased to qualify as an ISA Manager effective from 1st March 2018. Ordinarily, individual ISA account holders would be required to transfer their account to another ISA manager within 30 days to preserve the ISA status of their assets. However, having regard to BACSL’s special administration, HMRC have agreed to relax such a deadline in order to preserve ISA status. You therefore do not need to take any action at this time.

 

Can I still make transactions through my account?

 

Beaufort cannot carry out any investment activity following the FCA Supervision Notice.  Therefore it is not possible for you to transact on your account.

 

How can I confirm the contact details you hold for me are correct?

Please contact our helpdesk in order to confirm the contact details we currently hold for you. We are able to update your address, email address, bank account details as required after taking you through the necessary security and identity checking procedures.

The majority of clients should have been sent a link to the Client Portal, if you have not been communicated to, please click here to access the Client Portal or please contact the help desk as noted below.

Please call our helpdesk or email client.services@beaufortsecurities.com for more information during helpdesk hours from 9am until 5pm Monday to Friday excluding public holidays:

UK: 0800 063 9283 or International: +44 (0)20 7293 0227

 

I believe I held an account with Beaufort, but I don’t know my Client ID. How can I check to see if I do hold an account?

If you believe you held an account with Beaufort, please call our helpdesk to speak to a member of our team from 9am until 5pm Monday to Friday excluding public holidays. After taking you through the necessary security procedures, they will be able to confirm whether or not you held an active account with Beaufort at the time of the insolvency.

The majority of clients should have been sent a link to the Client Portal, if you have not been communicated to, please click here to access the Client Portal or please contact the help desk as noted below.

UK: 0800 0639283 or International: +44 (0)20 7293 0227

 

Pre-administration mis-selling complaints against Beaufort Securities Limited (BSL)

 

As far as Financial Services Compensation Scheme (FSCS) is concerned, there is a separate £50,000 limit for advice claims (which relates to BSL) and £50,000 for client money and/or client asset losses (which relates to BACSL).

Therefore, if you are owed compensation from a FOS award, you can claim up to £50,000 from the FSCS (relating to BSL).

If you suffer a shortfall in the assets returned to you from any portfolios you held with Beaufort, you can claim up to £50,000 from the FSCS (relating to BACSL).

The FSCS have been in touch with the Financial Ombudsman Services (FOS) to request information about outstanding complaints against Beaufort Securities for mis-selling. We understand the FOS has written to all affected clients asking for consent for them to pass their files to FSCS. The FSCS will then assess and pay compensation up to the £50,000 limit. FSCS will then make a claim on Beaufort's Professional Indemnity insurance. If the FSCS makes a recovery in relation to a client whose loss was not fully covered by the FSCS compensation, then FSCS will pass that recovery over to the client.

 

What if I wish to contact BSL's Professional Indemnity Insurer about my claim?

We are aware of some 700 claims asserted by clients against BSL for compensation in respect of various matters, including poor investment advice. Clients of BSL who believe they have such a claim can submit it to the FSCS via its on-line portal at: 

www.fscs.org.uk/your-claim/

FSCS compensation is subject to eligibility and is capped at £50,000 per Client.

Alternatively, Clients may wish to seek recovery (pursuant to the Third Party Rights Against Insurers Act 2010) from BSL’s Professional Indemnity Insurer, the details of which are provided below:

Insurer : Nexus Underwriting Ltd

Type : Civil Liability & Directors and Officers Liability policy

Policy Number : FH1703759/FH1601921

Address : 131 Finsbury Pavement, London, EC2A 1NT, UK

However, the FSCS will not be able to consider a claim for compensation from a Client who is also pursuing their own claim direct with BSL’s insurer.

I have been approached by a third party.

The administrators are in the process of identifying a recipient broker and will communicate directly with those clients.  A client will be able to nominate another new custodian but that may delay the eventual transfer depending on the circumstances at the time.  This is a complex exercise to arrange and execute.  The administrators hope that a transfer of this nature may be achievable in September 2018 at the earliest. We would advise clients to be wary of any approaches made by other firms.

 

Can I speak to the person in charge?

The administrators are unable to answer individual client queries due to the volume of requests. At this stage, communication is best directed through the channels we have set up. Regular updates are posted on our website www.pwc.co.uk/beaufort

 

Can I speak to my usual contact at Beaufort?

No. The Firms are currently unable to execute any new business or act on any instructions from clients.

 

Who do I contact with any problems or questions?

If clients of the Firms require more information about how they will be affected, they should continue to monitor www.pwc.co.uk/beaufort for further announcements or call the following numbers, which will be open from 9am until 5pm Monday to Friday, excluding public holidays:clients

UK: 0800 063 9283

International: +44 (0)20 7293 0227

 

How can I keep updated?

Please continue to monitor www.pwc.co.uk/beaufort for further announcements from the administrators. We have a list of clients and will be contacting you in turn when we have further information or guidance.

 

These FAQs have been prepared for information purposes only and are subject to change without notice.  They are not intended to create, alter or amend any further rights or existing rights between clients and BSL or BACSL.

Russell Downs, Douglas Nigel Rackham, and Dan Yoram Schwarzmann have been appointed as joint administrators by the High Court to manage the affairs, business and property of Beaufort Securities Limited. Russell Downs, Douglas Nigel Rackham, and Dan Yoram Schwarzmann have been appointed as joint special administrators by the High Court to manage the affairs, business and property of Beaufort Asset Clearing Services Limited. The ​administrators and ​special administrators (together the "Administrators") act as agents of the companies, without personal liability. All are licensed in the United Kingdom to act as Insolvency Practitioners by the Institute of Chartered Accountants in England and Wales. They are bound by the Insolvency Code of Ethics which can be found at: https://www.gov.uk/government/publications/insolvency-practitioner-code-of-ethics.

The ​Administrators may act as Data Controllers of personal data as defined by UK data protection law depending upon the specific processing activities undertaken. PricewaterhouseCoopers LLP may act as a processor on their instructions. Personal data will be kept secure and processed only for matters relating to the Administrators' appointment. Further details are available in the privacy statement on the PwC.co.uk website or by contacting the Administrators.

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