Mystic Meg are we? If we could predict the future we would all be rich
My understanding, roughly speaking on a basic level is that to operate as a UK / EU broker you must segregate client assets from your own. If you as the broker were no longer considered a ‘going concern’ (insufficient funds to maintain the business for the next 12 months), the client assets are segregated from your liabilities and could be transferred to another broker.
That said - there are also examples of brokers that have used client funds in breach of legislation, and people have had to claim through the FSCS.
It’s probably also worth noting that 212 have been around for a while, have been profitable for years and announced what 12-18 months ago that their Invest&ISA arm had grown to a size that it was self sustaining (aka profitable).
Companies need to produce accounts on an annual basis, so back to FreeTrade, you would ideally expect at least 6-12 months earning if they were to wind down.
Speaking for myself, it’s not T212 I’m worried about. Having looked at their accounts I see them being a going concern for at least a number of years yet. It’s FreeTrade that I think originally began this thread and the quote in the first post on this thread was actually a quote where someone had answered a post I made on the FreeTrade forum where I voiced my doubts about their potential solvency. So FreeTrade worry me, hence why I wish to transfer to T212 once I’m able to open my new ISA on 6 April 2023.
I have the official response from the FSCS… see below… it was highly unhelpful:
“ Thank you for contacting FSCS on 13th March in relation to FSCS protection.
Investment platforms typically arrange, safeguard and administer investments on behalf of customers and offer them access to investment products from a number of different providers. Investors can use platforms to access information and tools to help them with investment choices. They can also use them to make transactions, such as buying and selling shares and funds.
Use of a platform can affect whether the investor has a direct relationship with other, regulated firms in the chain, such as the actual provider of the investment. This, in turn, can affect FSCS protection if the regulated firm fails.
This is because FSCS’s rules generally require the firm in default to have carried out a regulated activity “with, or for the benefit of” the investor, and require the firm in default to owe a civil liability to the investor (e.g. rather than to an intermediary such as a platform). A civil liability simply means that a UK court would hold the failed firm responsible for a customer’s losses. There are some exceptions, such as when the intermediary is a bare trustee, agent or nominee of the underlying investor.
The precise effect of using a platform on the relationship between the investor and the other regulated firms (and hence on the investor’s FSCS protection) will depend on the circumstances and legal terms in each case. Ask your platform for further information about how FSCS protection would apply to you in different scenarios.“
As the email above was highly unhelpful and did nothing in terms of clarify I followed up and got the below response:
“FSCS may be able to provide compensation if an investor bought a product through an execution-only platform, depending on what caused the loss and if there’s any legal liability owned. So, if a broker platform was found to be liable for the losses, FSCS could potentially award compensation to affected investors. We do not protect losses which arise simply from investment performance, however, i.e., a product not performing in the way you had hoped. Our compensation limits page provides more details”
Are you sure the £85k limit protection would apply (i.e. you have a £80k Cash ISA with Barclays, and you have £10k in cash in T212 which T212 holds with Barclays, that would mean you have £5k unprotected)?
I assumed the limit is counted towards accounts held in your name (which the T212 one isn’t, although they hold part of the money in Barclays in behalf of you).