Safety of Balance in FCA-Regulated Investment Platform
Discussion
Please excuse me if my terminology is incorrect! As I understand it, in the event of a FCA-Regulated Investment Platform going bust and being unable to meet its financial obligations to you, FCA protection extends to the first £85,000 (just as applies for FCA-regulated banks). Surely many people have significantly more than this in (for example) Stocks & Shares ISAs.
Is this a material risk and something to be wary of? Am I missing something fundamental (I suspect I am!).
Is this a material risk and something to be wary of? Am I missing something fundamental (I suspect I am!).
AdviceHunter said:
Please excuse me if my terminology is incorrect! As I understand it, in the event of a FCA-Regulated Investment Platform going bust and being unable to meet its financial obligations to you, FCA protection extends to the first £85,000 (just as applies for FCA-regulated banks). Surely many people have significantly more than this in (for example) Stocks & Shares ISAs.
Is this a material risk and something to be wary of? Am I missing something fundamental (I suspect I am!).
Most people are winging it on the basis that if Vanguard go down then it's probably the end of society anyway.Is this a material risk and something to be wary of? Am I missing something fundamental (I suspect I am!).
Of course client funds should be ring-fenced accounts so they should still be safe - unlike a bank which is lending out it's depositors money & can (& has in the past) run out.
I'd be interested to know the answer to this as I use HL and T212. A few months back on the PH "gamble" thread this was discussed and it required reading of the Tc&Cs of your particular platform.
From memory (and this may well be wrong and out of date) the platform reserves the right to put any cash you have sat in your account (i.e. not spent on shares etc) into a bank deposit account and so get interest on it. T212 (again from memory) stated that this would be an FSCS compensation scheme backed bank but would not guarantee that would always be the case. In terms of the shares you bought then (assuming they are real shares you are buying) then I believe those shares are registered to your name in a ledger somewhere held by your platform - i.e. they are your property not the platforms. So if the platform fails *somehow* you should be able to recover those shares to yourself.
The above was my loose translation of what I read at the time, it may be all wrong. I'm writing it in the hope someone who knows much more will confirm it or give the actual facts.
I dare say it differs between platforms, I heard that for some platforms you don't actually own the shares you're just buying movements so maybe those have a higher degree of risk of not been compensated?
From memory (and this may well be wrong and out of date) the platform reserves the right to put any cash you have sat in your account (i.e. not spent on shares etc) into a bank deposit account and so get interest on it. T212 (again from memory) stated that this would be an FSCS compensation scheme backed bank but would not guarantee that would always be the case. In terms of the shares you bought then (assuming they are real shares you are buying) then I believe those shares are registered to your name in a ledger somewhere held by your platform - i.e. they are your property not the platforms. So if the platform fails *somehow* you should be able to recover those shares to yourself.
The above was my loose translation of what I read at the time, it may be all wrong. I'm writing it in the hope someone who knows much more will confirm it or give the actual facts.
I dare say it differs between platforms, I heard that for some platforms you don't actually own the shares you're just buying movements so maybe those have a higher degree of risk of not been compensated?
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