Long term investing reassurance (hopefully)

Hey Dao

  1. So I am from Switzerland and my account is also safe up to 100 000 Euro?

  2. This 100 000 Euro is just the cash on my portfolio or the stocks I have?

For example I have 200 000 Euro Cash on my Account and Stocks worth 120 000 Euro - > so everything is safe or just the cash for 100 000 cash? (-220 000 euro)

Or are the 120 000 Euro in stocks safe till 100 000Euro? (also - 220 000 euro)

Or is both together so 320 000 Euro safe up to 100 000 Euro? (also - 220 000 euro)

Hope you understand me :wink:

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@reLapse

My current understanding is that as funds (cash) are stored with a 3rd party which is registered with the FSCS, the cash balance of your account should be protected up to £85k (thus whatever this equates to in Euro’s at the time of collapse/claim, though not sure which) and there is no explicit statement that requires you to be a UK citizen to receive this protection as it is set up in line with the EU’s requirements for member states to run such protection schemes.

As T212 holds your shares, I think these are treated separately and T212 would go through the work of sorting out who owns what and making preparations for transfer these shares to a broker of your designation.

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1) your Investments may not be segregated and separately identifiable from the Investments of the firm or custodian in whose name your investments are registered;

2)as a consequence, in the event of a failure, your Investments may not be as well protected from claims made on behalf of our general creditors. You should note that when we arrange for a third-party to hold your Investments overseas there may be different settlement, legal and regulatory requirements than those applied in the UK.

  1. Where can I find information about custodian account in whose name my investments are going to be registered? Can’t find any. I want to know who can I contact in case T212 goes down.

  2. So basically you are saying that in the event of the failure your are going to prioritize other creditors and not us I don’t feel that safe knowing this…

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Correct me if I am wrong here.

I understood that cash / free funds are kept with Barclays in a segregated account

There equity (which I understand is the money you have invested in stocks / shares / funds) is in the custody of interactive brokers …who are absolutely massive. Look it up on Google. Seems likely that most of these apps use interactive brokers. So if folk are thinking of looking elsewhere would likely think you’d be in a similar situation with any broker/ app

I may be completely misunderstanding

Bob

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@Kraske its not T212 that is doing the prioritising. that would be those on the other end looking to collect from T212 what they believe is theirs.

there is an order when it comes to settling accounts and at the top of the list are the powerful entities in direct contract with the company, as signed and agreed in legally binding paperwork.

just look at what happened when Thomas cook collapsed, the first to claim their dues were those owed money by TC according to contractual obligations, shareholders had to wait for whatever was left before receiving their cut.

  1. this just tells you that T212 holds a large pot that contains all the shares which are entrusted to them on our behalf. when we purchase a share, T212 does so for us and holds onto it, then essentially logging in a separate ledger that we are the owners of x.x numbers of shares in that company/ETF/Bond. we don’t have our personal names on any of the shares (like if we were to purchase direct from the company or hold physical certificates) which is why it mentions they cannot be distinguished, but you would receive your portion once they are able to check the ledger against your name, as recorded in your account. T212 going down wouldn’t simply be an overnight thing and so you can expect them to go through the process of sorting through ownership until everything has been settled.

  2. debts are always repaid before wealth is distributed. no matter what, this happens first and the same occurs when people pass on their wealth via a will, debts are calculated and subtracted from the total sum before the remaining wealth is distributed as stipulated. In this case, T212 holds onto their own funds which will be weighed against any contractual obligations including debts, these will be attended to first and foremost to settle accounts. this will happen with any platform/broker you invest with not just T212. Any impact to investments would end up shared across all accounts and not covered by any specific individual should this occur and the effect would be marginal. It’s not a credible worry to have compared to the risks of you losing your money from making poor trading/investing choices.

As long as T212 remains well covered and debts are managed, I am not worried about my investments being with T212.

@Bob Indeed. Shares are in a pooled account with Interactive Brokers while funds are protected in segregated Barclays accounts that T212 cannot access to prevent fraud concerns.

what I don’t understand is why there are so many people lately trying to look into the wording of the terms, concerned that T212 is going to suddenly fail. I know that the stock market seeing such massive devaluation has people spooked but still…

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Hi Kraske,

We understand your concern, but in practice, this provision is not applicable with respect to your investments, please find out why:

The said provisions are intended to predict a hypothetical case where, in consideration of your best interests, your assets may be temporarily commingled with some of our own assets. Something we do not and do not intend to do. This is allowable for professional clients, not for retail - but we currently segregate all assets irrespective of classification.

Furthermore, if this hypothetical case occurs, then another hypothetical event would have to occur - either us or the custodian become insolvent. The reason for the provisions to exist in our agreement is that when drafting we tried to foresee all services that we may provide to our clients. However as stated above, due to the uncertainties in such scenarios, we are not commingling client assets with proprietary assets in any way. If you are a retail client, this would not be allowed, and our compliance with this restriction confirmed by our auditors.

In reply to your questions, please be informed that:

  1. The custodian we have been using for some years now is Interactive Brokers LLC (a member NYSE - FINRA - SIPC and regulated by the US Securities and Exchange Commission and the Commodity Futures Trading Commission). We hold an agreement with Interactive Brokers, that affirms the separation and segregation of clients’ (your) assets. The said agreement, its terms and the whole custodian relationship process is audited yearly by our client assets auditors as part of the regulatory confirmation required by FCA.

You can double-check the custodian, by reviewing the Best Execution reports, uploaded on our website (Client reports EQ) where you will see that the custodian and execution venue is Interactive Brokers LLC.

Furthermore, please be advised that Interactive Brokers also has equivalent client asset protection regulations similar to the UK. For the avoidance of doubt In the event of T212 UK / Interactive Brokers failure (for example due to insolvency), any assets held in a client assets account by third parties will be segregated from our / IB’s other assets and will not be available to our / IB’s creditors.

  1. As explained above your assets are segregated from our / IB’s assets at all times, so your assets and your claims will never compete against our creditors’ claims.

Particularly, please note that all investments (money or shares) are held on your behalf in accordance with the FCA’s Client Assets Rules. Ultimately, all of our clients’ money and assets are held and safeguarded in segregated accounts alongside the property of our other clients, hence segregated from all our obligations towards third parties.

Finally, to address any concerns, please note that as a firm regulated by FCA we are also subject to the requirements of the capital and liquidity rules of the FCA which requires T212 UK to ensure that it has sufficient financial resources to meet its liabilities as they fall due. T212 UK monitors its financial resources on an ongoing basis and reports the results to its Board and to the FCA. We are subject to yearly External Audit by a reputable audit firm of accountants who come to verify and confirm our compliance with the FCA rules to safeguard clients assets and to assess the basis of our financial resources.

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@Dao yeah I think a lot of folk are probably new to investing (a lot of new accounts on trading 212) and are worrying about the worst case scenario. I am pretty new to it. However from the responses here and a few other posts I am not worried anymore . On a side note a few have suggested investing in many different platforms… I am not seeing any point in doing that especially given the complications with regard to how many ISA accounts you would need to set it up.

@AlexK you and your team doing a great job both with the app and also answering these questions.

Bob

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@Bob For (Stocks and shares) ISA’s you wouldn’t set up multiple, you would just keep your ISA together with the best provider. the recommendations to have many GIA portfolios is made by those whose opinion is that ALL of their funds should be protected rather than just a portion, so they aim to keep a balance under or near £85k for all of them, this has the benefit of reducing the impact in case one does go under as the rest of your funds are untouched, but it has the added tediousness of needing to go through many different accounts to make adjustments, take profits, collect dividends etc plus there’s a higher chance of one of the brokers/platforms you have a portfolio with facing difficulties.

an absolute headache if you ask me. the alternate and more popular opinion is to just hold everything with one, because now there is only the slim chance of that one platform/broker facing issues. The biggest risk of investing has always been the market and your decisions to hold/sell your positions at any given time.

@AlexK thanks for the specifics. It’s been a headache to try and go through some of the legal-speak in terms and conditions as a regular person, so I could only try to the best of my ability. Knowing that it referenced a hypothetical extreme-case scenario made deductions complicated for me :exploding_head: I just keep hoping to avoid misleading people or causing more confusion.

As a small check in case people ask again, would the ‘funds’ protected by the FSCS amount to just the cash balance, or combined cash&equity when looking to claim?

I still have much of the regulations and industry to read up on and get more familiar with to be able to respond with any more certainty to highly specific questions.

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@AlexK Hi AlexK,

Based on what has been written on this thread, would it be correct to say that since the shares are not held in our individual names, we would not be able to attend or vote at the Annual General Meeting (AGM) of the companies in which we have shares.

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@cantuar I think the Share Dealing Service Terms of Business https://www.trading212.com/en/client-agreement-st
state what is official :

20. Voting Rights, interest, Dividends, and Corporate Actions.

20.1. We are not obliged to but we may arrange for the exercise of any voting rights, or the exercise any conversion or subscription rights attaching to Investments we hold on your behalf.

20.2. We will be responsible for claiming and receiving dividends, interest payments and other income payments accruing to your Investments we hold on your behalf.

20.3. You shall be solely responsible for providing us with your instructions in respect of clause 19.1 and 19.2 above but if we are unable to obtain your instructions we may, without incurring any liability, use our judgement and act as we think fit in your best interest.

So if I understand Trading212 don’t say they will always provide for example certificates of ownership for shares so you can exercise potential voting rights, but they also say they might ! We just have to ask ! But what will the result be… Anyone has tried ? One of the team might say what the general procedure is ?

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@zyfihx @cantuar We’re working on enabling online voting for shareholders but that’s not very high on the list of priorities.
At that moment, it’s not possible to exercise your vote. We can issue a certificate of ownership but that doesn’t guarantee that you can attend a general meeting.

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@David @zyfihx Thanks for the information.

Thank you for the information, which makes me wonder…

If trading 212 is offering free trading but the equity is held in custody at Interactive Brokers and the funds are kept with Barclays… how do you guys make money? Just by the spreads on the shares?

Will we be notified beforehand if you ever decide to put fees on withdrawals?

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@Lmiturbe

They make a large portion from trades on their CFD platform.
70-80% of people lose money on CFD, meaning they make 70-80% for everyone using CFD.

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Also more info here.

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Thank you. I’m in the process of investing in a long term large portfolio and everything so far sounds too good to be true. The fact that it’s an approved company by the FCA gives me reassurance but still makes me wonder how safe our money is?

£85,000 is safe regardless.

Trading212 is safe, they have been around for a while now.
Great communication from their team, I’m happy with them so far.

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I believe it’s called due diligence. There have also been some inconsistencies in the terms versus information in emails and forums. I understand very well that more people are actually reading the terms now.

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Maybe I should read the topic to the end but… this is how I see it… Those £85 refers only to the cash, it’s EU law (100k in local currency). As far as I read, our money is at Barclays account, so if you have £80k in cash (and 10m in stock), and if Barclays goes bankrupt we are covered by FSCS even if we are not UK citizens. One question, if we all have separate bank accounts, why we have to wire money to the joint account and put reference in the description, why we don’t have our sort code and account num? If £85k applies to all customers’ accounts, that’s not enough, although Barclays certainly won’t go bankrupt.

Purely out of curiosity, is it technically possible that someone from a brokerage using our logins sells all the shares we have and transfers the money to a secret account?

Assets are at custody with IB, for example, purely theoretically, if you buy 95% of the shares of a company, you will not be listed as the owner, it will be IB.

Technically, they shouldn’t be able to see/know your login info.
Practically, anything is possible, i guess… :sweat_smile:

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