Updated information on what you should do if you were a customer of these firms.
What happened to Beaufort Securities (BSL) and Beaufort Asset Clearing Services Limited (BACSL)?
The FCA placed BSL and BACSL into administration and Special Administration respectively on 1 March 2018, following an urgent application to Court. This was shortly after the US Department of Justice brought criminal charges against BSL (alongside other parties) for its alleged involvement in securities fraud and money laundering, and after the FCA had issued both firms with supervisory notices prohibiting them from carrying on any regulated activities.
When will I get my client money and custody assets?
In accordance with the Distribution Plan, the majority of customers have already had their assets transferred to a third party nominated broker, or returned directly to them. To date, 99.7% of client money (excluding compliance clients whose monies cannot be transferred) and 99% of client assets (excluding compliance related assets unable to be transferred) have now been returned. See further information on the transfers and the Distribution Plan from the administrators' website.
Clients should contact the administrators directly if they have any questions on the Distribution Plan or the return of their assets. A small number of clients have not yet had their full client asset holdings returned to them and the administrators continue to work on returning these last residual holdings.
Will I get all my client money and custody assets back?
The administrators have confirmed that for the vast majority of clients the Financial Services Compensation Scheme (FSCS)[1] will cover any shortfalls of client money or custody assets and all the costs of distribution. There is a small number of retail clients (fewer than 10) for whom the costs of distribution and any shortfalls will be over the FSCS limit of £50,000, and the clients will have to pay any costs over this limit. FSCS cover is capped at £50,000 for Beaufort clients as the current £85,000 limit was introduced after the Beaufort firm failures.
Those clients who are not eligible for FSCS compensation (eg some corporate clients) – or have specifically requested not to receive FSCS compensation, will need to pay the costs of distribution of the client money and custody assets themselves, and will bear any shortfall in the assets they receive.
Will I have to pay for my assets to be returned?
The administrators agreed a cost allocation with the creditors’ committee and the FSCS that will see the FSCS cover 94% of the costs for returning assets to approximately 17,500 retail and corporate clients.
The cost for the return of custody assets is a flat fee, where maximum costs are capped at £10,000 per client account and will not exceed the value of the custody assets in each client account. The costs of returning client money is calculated as a percentage of each client money balance, which will not be more than 10%. The FSCS will cover these costs of returning custody assets and client money for all clients except those who are not eligible (ie some of the corporate clients), or those who have specifically refused to accept FSCS compensation.
Fewer than 10 retail clients will need to pay any costs at all. Most of the remaining 6% of costs will be borne by corporate clients.
What is the FSCS and will they cover any other losses?
The FSCS protects consumers when financial services firms fail. It is the compensation scheme for customers of UK authorised financial services firms. It has eligibility criteria both in respect of the people and businesses who are covered.
The FSCS will cover custody assets and client money shortfalls, including the costs associated with their distribution back to clients, for eligible clients up to £50,000.
Some clients may have suffered losses caused by BSL because of mis-selling, in which case they may bring a separate FSCS claim if they are eligible for compensation. If any clients have a Financial Ombudsman Service award in respect of BSL mis-selling then they can make a separate claim of up to £50,000 from the FSCS (ie this is in addition to any claim for recovering the costs associated with the return of their custody assets and client money from BACSL).
See more information about the FSCS on its website[1]
Do I need to use a claims management company (CMC)?
You should proceed with caution if you are approached by a claims management company.
For the vast majority of clients, there is no benefit in involving a third party in reclaiming your assets.
If you use a CMC to assist in the return of your assets, the CMC is likely to seek a fee which may reduce what you get back.
If you are considering using a CMC to assist with the return of your assets, we suggest that before you decide to proceed with this route you first discuss this with the Special Administrators, using the contact details provided on its website. Also see the FSCS's points to consider before using a CMC[2].
Why the change in value of custody assets?
The administrators obtained an independent valuation of the custody assets which provisionally valued the portfolios at around £500 million. An independent valuation was needed because of various different valuations being produced following the administrators’ appointment.
Is the FCA overseeing the administration?
The BSL administration has now come to an end and BSL is no longer authorised by the FCA. BACSL remains authorised and subject to supervisory oversight and the FCA’s rules. See more information on how we supervise firms in our Approach to Supervision document. The administrators have been appointed by the Court as Special Administrators in relation to BACSL. They are officers of the Court and need to comply with all insolvency law. The individuals appointed are also licensed insolvency practitioners and supervised by the Institute of Chartered Accountants in England & Wales (ICAEW). We are continuing to liaise closely with the administrators.
What happens next?
Now that the majority of the firm’s client assets have been distributed, the administrators are working towards the closure of the BACSL administration. A winding-up petition was presented to the Court on 7 July 2020 in this respect. This is expected to take effect following a further Court hearing in December 2020. This means that the firm will move from being in administration to being in Compulsory Liquidation, under the oversight of the Official Receiver.
Any residual client assets which have not yet been returned at that point will pass into the safekeeping of the Official Receiver, so that these can continue to be returned as soon as is possible. For further details see the administrators’ website[3].
What should I do if I have a claim but have not yet submitted this?
The Bar Date deadline for client money claims has now passed, but if you have a claim for client monies or custody assets against BACSL you should still contact the administrators as soon as possible. See the administrators’ website[4] for contact details. If you have a mis-selling claim against BSL, contact the FSCS via its website[4].
Where can I get more information?
See further information on the administration on the administrators’ website.