Beaufort Client Campaign: Update 1

Campaign Status

Our campaign was only launched one week ago, but has already generated a terrific response. We now have over 140 campaign members signed up. Unfortunately this has created a backlog of membership requests to process, so please bear with us if you have not yet heard back from us and accept our apologies for any delays. Thank you also for the generous donations to the fighting fund, which will help towards any legal costs that may be incurred defending Beaufort clients’ interests.

We have now established a closed “community” for campaign members on the “All Answered” platform. This will allow you and us to post messages, including campaign news updates, and respond to them. Campaign members will soon receive invitations to join the community, if you have not already had one. Please accept the invitation, and register on All Answered, in order to be informed of the latest news and to keep in touch with other campaign members and the campaign leaders.

ShareSoc Beaufort Client Committee

Events have been moving very fast over the last week and we have now formed a ShareSoc Beaufort Client Committee (SBCC), comprising myself, ShareSoc chairman Mark Northway, ShareSoc director Mark Lauber, campaign co-ordinator Nandish Haria and several major Beaufort clients and client representatives, together representing ~£80m of client assets. The SBCC will direct how the campaign proceeds in relation to the Beaufort Special Administration and how the fighting fund is deployed. The committee met for the first time on Tuesday. We agreed that our objective is to minimise the costs of the administration and the time before assets are returned to Beaufort clients. We feel that the best way to achieve this will be to transfer the Beaufort client accounts and assets to another FCA authorised broker as quickly and expeditiously as possible and we will push PwC to do this. We have received informal legal advice (from a top insolvency lawyer) on how this can be achieved, but have not yet formally engaged an advisor, for reasons that will become clear later in this update.

Two committee members have already met with the Administrator. We understand that some 37 staff are still being employed by BSL and BACSL and that costs of the operation, plus PwC costs, plus legal costs are accruing at a rate of around £1m per month. The Administrator has so far failed to provide a satisfactory explanation of why such a large operation has been necessary. On the positive side, PwC has shown some willingness to explore the possibility of transferring the client accounts and assets, as we suggest. This brings us on to the subject of the BACSL creditors’ committee.

BACSL Creditors’ Committee

As mentioned in PwC’s notice of meeting issued on 20th April, one of the functions of the meeting, to be held on 10th May, will be to appoint creditors’ committees for BSL and BACSL. The BACSL committee plays a vital role, in that it will have powers to scrutinise the administration costs and conduct, in detail and supervise the administration process. PwC have indicated that they will provide further details about the operations still being performed at BSL and BACSL and the costs thereof to the creditors’ committees (but not before the committees are formed).
From PwC’s notice of meeting:

Once established, the BACSL committee will work closely with the Administrators to review and approve the distribution plan for BACSL. Furthermore, in due course, each of the Committees will be asked to approve the remuneration of the Administrators.

We understand that three places on the BACSL committee are reserved for Beaufort clients and we are therefore recommending three nominees for the committee.

Beaufort Creditor and Client Meetings

The meetings on 10th May (today) are critical for Beaufort clients. It is unfortunate that due to the very short timescale we have had to consider and consult on these matters, we have not been able to make a recommendation on actions for the client meeting until now. That means that only those attending the meeting in person will be able to act on our recommendations.

We therefore intend to request an adjournment to the meeting, which will allow time for clients not present in person to submit revised proxy forms and votes. Please note that this request is not unanimously supported by all members of the SBCC, some of whom feel that an adjournment will cause unnecessary delay and cost.

ShareSoc Recommendations

There are two primary matters up for discussion at today’s meetings:

1. Vote on the adminstrator’s proposals
2. Appointment of creditor committees

PwC’s current proposal reads as follows:

The proposal of the Administrators is to continue with the administrations in order to achieve the stated objectives; with the primary objectives for BACSL being to return Client Money and Client Assets to Clients, including assisting the FSCS to enable the FSCS to administer the compensation scheme in relation to eligible claimants.

We intend to propose an amendment to that proposal to read:

The proposal of the Administrators is to continue with the administrations in order to achieve the stated objectives; with the primary objectives for BACSL being to return Client Money and Client Assets to Clients at the earliest possible time and for the lowest possible costs and assisting the FSCS to enable the FSCS to administer the compensation scheme. In the meantime the Administrator will try to sell BACSL to effect these objectives.

And then vote in favour of the amended proposal.

The SBCC makes the following three nominations/recommendations for the BACSL creditors’ committee. Please vote in favour of these nominees to ensure that competent people aligned with our agenda are elected to the committee. All are clients of Beaufort with substantial personal assets held by BACSL.

1. Mark Hyde

Mark is a highly qualified and experienced consultant on insolvency matters with Clifford Chance. You can read his profile here: https://www.cliffordchance.com/people_and_places/people/lawyers/gb/mark_hyde.html
It is possible that our campaign and the SBCC will avoid the need to employ further legal advisers (at very substantial cost) if Mark can provide all the professional advice and support we require.

2. Clive Brook

Please note that the recommendation to appoint Clive has not yet been fully ratified by the SBCC. If it is NOT ratified before the meeting then we will recommend Richard Ross, whose details are below.

Resume for Clive Brook:

Qualifications:

Chartered Accountant, England & Wales, Admitted 1973

Career – Post qualification

1973 – 1981 Nine years in industry immediately after qualification, including 3 years with a property group which I had to eventually put into receivership. I was appointed to various Committees of Inspection and worked for several of the major accounting firms appointed as Receivers for several months.

1981 – 1992. 3I plc. Joined their investment team in London and progressed to main Board Director during my 11 years. My appointment to the Board had to be approved directly by the Bank of England, 3i’s Regulator at the time. Was accordingly regulated by the FSA after the implementation of the 1985 Financial Services Act. I was responsible for a large number of loan recovery situations and hence built up a useful working knowledge of insolvency proceedings.

1992 – 1994. Independent corporate finance consultant

1994 – 2009. Pannell Kerr Forster (subsequently PKF, and now merged with BDO). Corporate Finance Partner in the North of England. Was one of the parties consulted by the London Stock exchange over the establishment of AIM. Was involved as Reporting Accountant in numerous actual and attempted floats. Was regulated throughout my time with PKF by the FSA (now the FCA)

2009 – to date. Amberley Advisory – an FCA regulated corporate advisory business

2012 – to date. Director, North West Business Finance Limited, which runs the North West Fund, a £155 million venture capital & loan fund targeting investment in SMEs in the region. Its funds were sourced from the EU via the ERDF (European Regional Development Fund) and the European Investment Bank (via its subsidiary, the European Investment Fund).

Additionally, I own a variety of UK, US and other shares and bonds, the majority through the Beaufort Platform. I am one of the approximately 750 investors whose loss may not be fully covered by the FSCS. So, I have real ‘skin in the game’ with regard to the handing of the Administration of Beaufort.

3. Robin Binks

Robin Binks qualified as a Chartered Accountant at Arthur Andersen, was an investment banking director at S.G. Warburg & Co. and West Merchant Bank, a corporate finance partner at Deloitte, chief executive of Cannon Street Investments, a listed conglomerate involved in construction, electronics and hotels and leisure, chairman of Freeport, a listed developer and operator of retail outlets, and non executive director of a number of companies and charities.

Robin has substantial assets held by BACSL

4. Richard Ross

Richard is only nominated in the event that Clive’s nomination is not ratified or a fourth position on the BACSL creditors’ committee becomes available.

• Graduated LSE in 1964 BSc(Econ).
• Qualified as Chartered Accountant in 1967.
• Finance Director of the Regentsmead Group 1967-1990 (a group of 100 companies).
• Appointed Chairman of the Regentsmead Group in 1990.
• Extensive experience in accounting, management, cost control, reorganisations, systems and analysing new businesses.
• Appointed Chairman of the Rosetrees Trust in 1990. Rosetrees Trust is a family charity supporting cutting edge medical research with 350 projects p.a and over £350m raised in major grants.
• Substantial personal investment held at Beaufort Securities, so interests aligned with all clients.

We anticipate that numerous nominations will be made at the meeting tomorrow and that is another key reason why ShareSoc advocates an adjournment: so that details of all candidates can be circulated to all Beaufort clients and a proper vote can be held, whereby votes are counted in accordance with the scale of assets held by each client voting.

It is essential that appropriate candidates are elected to the committee, who will hold PwC to account and ensure the speediest and lowest cost possible resolution of this unfortunate matter, and that administration costs are borne equitably by all Beaufort clients (and not loaded unfairly onto the larger accounts, benefiting the FSCS), if they cannot be recovered from other sources.

We will post a further update on the campaign in due course relating to more general actions to secure the position of ALL investors, by improving the legal and regulatory framework governing broker insolvencies such that assets which are supposedly ringfenced are also properly protected from legalised raids by administrators.

Mark Bentley
Director