Beaufort Securities Limited ("BSL") in Administration & Beaufort Asset Clearing Services Limited ("BACSL") - in Special Administration ("the Companies") - Proposals and initial meeting

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On 20 April 2018 the joint administrators of BSL and the joint special administrators of BACSL posted to all known creditors and Clients of the Companies correspondence giving notice of the initial meeting of the Companies' creditors and Clients. That correspondence can be found below: 

Letter to all known creditors and Clients giving notice of the initial meeting

Initial creditor meeting minutes 

The Proposals

The joint administrators' and joint special administrators' proposals for achieving the purpose of the administrations of BSL and BACSL

Proposals Approved

BSL and BACSL voting summary

Notice to all clients and creditors (Update and Proposals approval)

BSL Remuneration Report

The joint administrators' remuneration report for Beaufort Securities Limited

Questions and answers – submitted by creditors and clients on 10 May 2018

During the creditors’ and clients’ meeting held on 10 May 2018, over 100 questions were submitted to the Administrators by clients and creditors. After reviewing these questions, we have summarised the fundamental points below. Please note, we are unable to comment on or answer questions on behalf of third parties. 

If you require additional information, please refer to our FAQs and look out for our latest updates here.

Questions

Answers

Costs

 

On what legal basis are the Administrators entitled to use client assets to pay administration costs?

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 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.

Why not limit costs to £50k per client?

We will do all we can, in consultation with the creditors’ committee, to manage these costs to be as low as they can be.  We will work closely with the committee and indeed the wider client base to consult in terms of the process and how the costs should be allocated.

Why can't you charge all clients the same percentage?

We have considered a flat allocation across all clients; we anticipate that will unfairly penalise clients with small positions; equally, a pro rata value allocation will probably unfairly penalise people with larger positions.  So, we have looked at something like a sliding scale, and it is that sliding scale that we would start as a basis for a consultation, but we accept there is no right answer and we will listen to feedback.

When will you give the 700 clients with assets in excess of £150,000 any indication of the amount that is likely to be deducted from their assets?

Both the level of reserve and its allocation will be determined in conjunction with the committee. An update will be provided in due course.

What more is PwC is doing to reduce running costs of the Administration and ensure that minimal client assets and cash are put at risk?

 

The Administrators understand (and are very sensitive to) clients’ concerns in respect of the time and cost that will be associated with the process of distributing client assets and client money. The Administrators’ appreciate that a key measure of the success of the Administration will be the extent to which they are able to return client assets and client money quickly and efficiently. We will work closely with the committee to ensure appropriate governance around costs.

In order to reduce mailing costs can we allow clients to opt out of paper based communications?

Paper based communications to date have been sent to clients where we do not hold an email address in the Firms’ records.  If you wish to be contacted via email, please let us know by calling our helpdesk or email client.services@beaufortsecurities.com.  Helpdesk hours from 9am until 5pm Monday to Friday excluding public holidays:

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

Please confirm that you will provide hard copy statements on request

To manage costs, we have only sent hard copies to individuals where we do not hold an email address in the Firms’ records.  If you would like to request a hard copy of your statement, please contact our helpdesk or email client.services@beaufortsecurities.com.  Helpdesk hours from 9am until 5pm Monday to Friday excluding public holidays:

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

Is it right to assume that clients funds will not be used to pay for anything other than the legitimate costs associated with returning clients shares & assets?

 

Yes. It should be understood that these costs will cover maintaining essential ongoing operations including 35 retained Beaufort staff, office space and related expenditure, alongside the IT infrastructure which is critical to support the client records. Additionally there will be the costs of the Administrators’ team and legal advisers. Most costs will be subject to VAT which is not recoverable.

Distribution plan

 

Why do you believe the Administrations will take around 4 years and in this period what is the longstop date when you anticipate all client assets and monies will be returned?

The Administrators do not believe that it will take around four years to complete the process. Rather, we very much hope that it will be completed in a much shorter time period. In circumstances of significant uncertainty that currently exist, however, we consider four years to be the maximum realistic timeframe over which all remaining issues in the Administrations will be resolved.

After a period of assessment in order to formulate a detailed plan and recognising the positive milestones passed, such as the launch and initial response to our client portal, we are now working to this refined cost estimate of £55m over a two-year process.

In any event, the Administrators hope (in the event that a distribution plan is approved by the Creditors’ committee and the Court prior to the summer court recess) that a significant proportion of client asset and client money can be returned to clients as early as the autumn of this year.

Please provide information on corporate actions?

Outstanding dividends due to client accounts will be processed as soon as possible.  All other corporate actions (e.g. rights issues, bonus issues, open offers etc.) will revert to the default (i.e. “no action”) position at present as we are no longer able to act on client instructions for regulatory reasons. We are however exploring options to enable clients to take advantage of such actions.

Given that Beaufort already had a ‘view-only’ portfolio system, why has it been necessary to develop a completely new portal? 

The Firm’s portfolio system was created by a third party and would have had to be developed substantially to encompass the functionality required in the Administration.  The new portal has necessary functions for clients to agree their claims and has the flexibility to be developed further to support the Administration requirements.

Can you assure all Beaufort clients that they will only be transferred to a broker of their choice and not at your direction? 

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

Will physical share certificates be returned/made available immediately? If not please set out on what basis?

 

Where physical securities are held in the name of clients, it is the Administrators’ current expectation that they will be returned to those clients without any deduction having been made from them in respect of costs. That is on the basis (among other things) that the costs of returning these certificates ought to be minimal. Relevant clients will, of course, need to discharge any other indebtedness to BACSL or BSL before having such certificates returned to them.

The Administrators’ understanding is that BACSL (for the most part) came to be holding such certificates for existing clients who transferred their physical securities into its custody with the intention that it would (as and when the FCA permitted this) transfer the securities into CREST in dematerialised form to be held, subject to Beaufort’s standard client terms and conditions. There may be some physical securities held by BACSL which came into its possession in other circumstances and which may be more complex (and therefore more costly) to deal with. The Administrators may need to address any such instances on a case by case basis. In any event it is necessary for clients to confirm their entitlements through the Portal before the bar date. Only after the position has been assessed thereafter will we be able to consider returning physical securities.

Will warrants be assigned a nil value? If so, can they be distributed in advance of the main September distribution?  When will you return the unlisted, illiquid or nil value assets?

 

The unlisted, illiquid and nil value assets will be returned at the same time as other assets, to the extent that is practicable. The Administrators do not intend to draw a distinction between the liquid and nil value stocks and other securities for the purposes of asset returns, save that specific provision may need to be made (in the distribution plan) for the calculation of the costs contribution attributable to such securities.  Any such specific provision will be made with a view to ensuring that clients for whom such stocks are held bear an appropriate portion of the overall costs.

In what order and when are client assets and monies currently intended to be returned?

The Administrators’ current intention is to make initial returns of both client monies and client assets in September 2018.  It may be appropriate to prioritise those clients and securities which do not have complexities which may delay the process but we want to distribute as much as possible as quickly as possible.

What do clients need to do in response to the recent bar date notification?

You need to log onto the client portal or otherwise review your statement and check whether or not you agree with each of the items stated there. If you agree, you should confirm that through the Portal as soon as you can, but in any event by 8 June 2018.

If you disagree with anything in the statement, you should respond (ideally using the Portal) to the Administrators setting out precisely what you disagree with, the basis on which you disagree and enclosing any relevant documents or information in support of your position.

Can you confirm that client dividends are being collected and correctly allocated to the client accounts?

Unfortunately, there have been some difficulties with getting online feeds of all corporate actions into the books and records, but that is being actively worked on.  We can assure you that everything will be duly allocated.  In due course, we will put that information on the portal.

As far as FSCS is concerned are trading, ISA and Sipp accounts treated as separate entities?

FSCS eligibility rules can be found at https://www.fscs.org.uk/you-claim/.

We understand each individual beneficial owner of client assets or money is entitled to up to £50,000 of compensation in total no matter how many different accounts they hold.

Other

 

Is there FCA representative here today?

FCA representatives were present at the meeting.

Are the Administrators aware that a number of clients have been contacted by third parties, some of whom claim to be former employees, in relation to asset holdings with Beaufort?

 

The Administrators have been made aware of a number of clients who have been contacted by third parties, some of whom claim to be former employees, in relation to asset holdings with Beaufort.  No information has been shared with third parties with the authority of the Administrators and any such callers are not acting on behalf of Beaufort and have no arrangements with Beaufort that may expedite matters outside of the Administrators' published priority for a distribution plan. 

We strongly urge you to be mindful of sharing personal information over the telephone in unsolicited calls or through email.   

Will any losses be tax deductible?

This is dependent on each client’s own Tax position, and you will require independent advice.

Clients 

For the purposes of this letter and the proposals the term "Client" refers to people with Client Money and/or Client Assets as at 1 March 2018 held in accounts with BACSL.  These clients will not be required to provide any proof of debt to attend/vote at the creditors' meeting of BACSL.  Clients do need to complete and return the BACSL Client Proxy / Attendance Notification form below.     

Proxy forms

Creditors 

For the purposes of this letter and the proposals the term "creditor" refers to suppliers and former staff etc. Creditors will need to submit a proxy form and will also be required to submit a Proof of Debt.

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