Beaufort Client Campaign

This campaign is now closed as its principal objectives have been achieved with assets restored in full to almost all Beaufort clients. ShareSoc will consider whether to launch a further campaign to address the broader issue of the inefficient operation of the Special Administration Regime.

ShareSoc is appalled by the treatment of Beaufort client assets proposed by administrator PWC and the huge fees PWC intends to charge for their services. We have therefore launched this campaign, seeking to minimise the losses suffered by Beaufort clients and to minimise the time before clients regain access to their securities held by Beaufort. In addition we seek to protect the interests of all UK investors by improving the regulatory framework, so that client assets which are supposedly ringfenced are protected from a legalised raid by administrators.

Presentation on the Campaign

Mark Bentley presents on our Beaufort Client Campaign:

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Injustice for Beaufort Clients

The Financial Conduct Authority (FCA) declared Beaufort Securities Limited (BSL) and sister company Beaufort Asset Clearing Services Limited (BACSL) insolvent on the 2nd March 2018. The high court appointed Russell Downs, Douglas Nigel Rackham and Dan Yoram Schwarzmann of PricewaterhouseCoopers (PwC) as joint administrators of BSL and special administrators of BACSL.

Following an assessment of the financial positions of BSL and BACSL led the FCA to believe that both firms are insolvent and the FCA considered it necessary for insolvency practitioners to take over the running of the firms in order to protect assets from dissipation and protect the customers of both firms.

On 15th March, in a letter to clients, PwC mentioned that they had safeguarded the Firms’ IT and data systems as well as securing approximately £50million in segregated client money accounts and approximately £850million in client securities. PwC also confirmed that the monies and securities that were secured were held appropriately in accordance with FCA requirements.

On the 12th April, in a further letter to clients, PwC noted that client money and client assets were, as at the date of administration, substantially complete save for a very small number of isolated deficiencies. Furthermore, an initial independent valuation marked down the initial value of £850 client assets down to £500m as a result of illiquid / nil value positions.

A key point to note in this letter was that due to the absence of a surplus of funds within the Firms’ segregated resources, relevant costs would be deducted from clients’ entitlements to client money and client assets.

PwC also ruled out an expedited return of assets and with the majority of returns commencing in September 2018 at the earliest. PwC also estimated that around 700 clients with assets valued over £150,000 may experience a loss up-to a maximum of 40%. How is a hair-cut of 40% on ring-fenced assets fair?

Another key point to note here is that The FCA kept Beaufort Securities alive so the FBI could conduct an undercover investigation putting the interests of the FBI ahead of UK residents / citizens who had saved and invested through Beaufort. It is said the FCA gave the firm a stay of execution to allow US authorities enough time to gather the evidence required to bring the charges against the broker. Does the FCA not have a duty of care first to UK residents and citizens?

The administrators also want to charge an exorbitant £100 million for the administration over a period of 4 years. Because Beaufort did follow the FCA rules on ring-fencing of assets and client money, how can costs of £100 million be justified just to transfer an electronic registry of client assets / money to another broker?

There is a meeting on the 10th May where PwC have asked clients / creditors to vote on their proposals and there is no sight of a detailed distribution plan / exact costs. How can clients make the right decision if they don’t know what they are committing to?

I, like over 14,000 others, invested through Beaufort Securities only because of the assurance that assets / money are ring-fenced as per FCA rules. The whole notion of ring-fencing presumably is to protect client assets / money in such an event. The fact that PwC can dip into client assets / money means that savings and investments are not as safe as the FCA would have you think, even in a regulated entity. The liquidator’s proposals, which would breach the safety of ring-fenced assets, bring into question the whole system of regulatory and legal protection of investors in the UK. This has serious implications for all investors, whether you were a Beaufort client or not.

I strongly appeal to all investors to join this campaign and encourage other clients who have significant sums in Beaufort Securities to come together as soon as possible for a collective response on this matter. If you are not a Beaufort client, your support in this campaign is even more important as it will help us to push for regulatory change at the highest levels. Please register your support below, whether you are a Beaufort client, or not.

John Lee of the FT says:

I am very happy to endorse the thrust of ShareSoc’s campaign. We were all shocked to discover the seeming vulnerability of clients’ funds when we thought that they were ring-fenced and protected. This loophole surely has to be closed.

If you are a Beaufort client with assets in excess of £150,000, it is even more important that you sign up to this campaign so that we can pool our resources, think and act together to prevent this injustice and scandal from happening!

Join the campaign

Campaign Objectives

Our objectives are as follows:

Influencing the administrator through a creditors’ committee
Monitoring and controlling the administration costs of the BACSL, which may involve a change of administrator
Requiring that a transfer of the BACSL assets and accounts to another broker be properly explored
Ensuring that the costs of the BSL liquidation are kept entirely separate and are not charged to BACSL
Challenging the basis of the apportionment of costs among BACSL clients
Reviewing the actions and motivations of the FCA in this matter
Looking to have the 2011 Special Administration Rules reviewed to better protect the interests of investors

Campaign Updates

Update 1 10th May 2018 – Campaign Progress and Voting Recommendations: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-1/

Update 2 19th May 2018 – Outcome of PwC client and creditors’ meeting, including detailed meeting notes: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-2/

Update 3 10th June 2018 – Much improved distribution plan announced: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-3/

Update 4 10th August 2018 – Important progress for Beaufort clients and a ministerial meeting: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-4/

Update 5 8th March 2019 – work continues: https://www.sharesoc.org/sharesoc-news/beaufort-client-campaign-update-5/

Joining the Campaign

Please note that you can join this campaign, whether or not you are a Beaufort client, as the issues it raises affect all UK investors. If you would like to support our campaign to defend your interests, please complete the form below. In order to maximise the chances of a successful campaign, we need to take legal advice on how to challenge the administration, and may need to initiate litigation to make an effective challenge. ShareSoc is a not-for-profit entity, and is not able to finance this from our existing limited funds. We are therefore establishing a “fighting fund” to enable us to do this. The fund will be used primarily to finance professional work undertaken to further the campaign’s ends and also for any incidental expenses incurred by the campaign. Should the balance of the fund exceed our needs for this campaign, we will use that balance to further ShareSoc’s aims, including our shareholder rights campaign, which is aimed at changing custody arrangements in the UK, so that securities are directly registered in the names of their beneficial owners. As well as minimising the impact of a broker failure, such as Beaufort’s, this brings numerous other benefits for shareholders.

Neither the campaign co-ordinator, nor any ShareSoc directors will receive any remuneration for their work on this campaign. If you are prepared to contribute, please tick the box “Donate” to enable our secure Stripe facility for accepting electronic payments. Alternatively, you can send a cheque, made out to “ShareSoc”, to our office at this address:

ShareSoc, Suite 34, 5 Liberty Square, Kings Hill, WEST MALLING ME19 4AU

Please complete the form below, print it out and send it with your cheque, marking the back of the cheque “Beaufort Fighting Fund”.

Full members of ShareSoc can discuss this campaign in our discussion forums.

If you have assets exceeding £150,000 held with Beaufort, please tick the box marked “Large Beaufort Client”. In that circumstance PWC’s current proposal implies that you will suffer a disproportionate loss, and joining and supporting our campaign will be particularly important to defend your interests. We will keep you apprised of any issues particularly affecting clients with large accounts.

If you are not yet a member of ShareSoc, ticking the box “ShareSoc Membership” will grant you FREE associate membership of ShareSoc, bringing you the benefits described here. Alternatively, if you wish to support us further and gain additional membership benefits, you can join as a full member here, for less than 90p per week.

If you have any questions concerning this campaign, please do not hesitate to contact us.

Nandish Haria

Beaufort Client Campaign Co-ordinator

Mark Bentley

ShareSoc Director

Post Date: May 2, 2018

Group description:	Our group is interested in sustainable investing and our goal is to identify and evaluate businesses that will thrive through innovation and their transition to a ‘One Planet Economy’. By leveraging the skills of group members, we aim to deeply understand these businesses, particularly focusing on how they develop long-term valuable benefits for their customers. Each year, we plan to evaluate around seven businesses to identify opportunities where our valuation exceeds the market price. A successful outcome is defined as achieving a compound annual growth rate (CAGR), including dividends, of 10% over a decade.
Meeting Type/Venue:	Meetings are in-person in a pub near to Waterloo station in London.
Meeting Frequency/Timing:	Meetings are bi-monthly on a Monday from 10:45am to 4:30pm. Members are expected to also pay for their own lunch which secures the group free use of a private room in the pub. The cost is expected to be £35-40 per person, per meeting, in addition to your SIGnet membership fee.

Group description:	SIGnet Taunton is a new group with around 10 keen members at present, with a range of investment styles and experience. We welcome new members.
Meeting Type/Venue:	In person meetings at a golf club near to the centre of Taunton.
Meeting Frequency/Timing:	We meet on the first Monday of every month at a golf club near to the centre of Taunton, 11am until 3pm with a lunch break.

Group description:	An online group for those who are new to investing, or have only been investing for a few years. Including topics such as: – What is a share or a bond, why and how to buy them. – Comparing funds, unit trusts, Investment trusts and exchange traded funds. – Portfolio management and diversification. – ISAs, pensions, SIPPS and how to save tax. – How terms such as PE ratio and dividend yield are used to value a share. – How to use technical analysis or charting.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the last Monday of the month at 7:00pm.

Group description:	An online group for those who already have some experience in investing. Covering topics such as finding companies to invest in, financial statements and ratios, valuation / margin of safety, analysis of companies and investment trusts and exchange traded funds.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the last Wednesday of the month at 7:00pm.

Group description:	The Equity Income Group welcomes investors of all levels of experience, from beginners to advanced. The focus of meetings is on dividend paying Investment Trusts, though there is also discussion around individual shares.
Meeting Type/Venue:	Meetings are held online.
Meeting Frequency/Timing:	Meetings are held every 6 weeks on a weekday between 7 and 8:30pm.

Group description:	A welcoming group open to all types of investors. Typical meeting content is to have a deep dive presentation on a topic selected by the participants and a session on buy/ sell/ key lessons learnt last month.
Meeting Type/Venue:	In person at a friendly pub close to Piccadilly Circus
Meeting Frequency/Timing:	Monthly during the evening on the first Wednesday of the month.

Group description:	All levels of experience welcome. A typical meeting agenda includes: – Macro Environment – Trades: Members review existing positions and identify securities with promising TA entry patterns or setups and with suitable risk/reward. Any security, long, short, futures, options may be considered. The convener takes actual positions in trades and maintains his own detailed ledger, accurately measuring performance of individual securities and cumulative activity. Members are notified by e-mail prior to the entries or exits that are decided upon. Following each meeting an updated copy of the ledger is circulated together with the next meeting agenda. Members may wish to maintain similar ledgers of their own but there is no obligation to do so. – Technical Analysis: Techniques and systems used in trades. Members can request discussion of particular aspects of TA.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	The first Tuesday of every month from 7 to 9pm

Group description:	Open to all investors / people with an interest in investing. Typical meeting will involve members talking about recent purchases, successes, failures and possible future purchases. Also with occasional visiting speakers or members making presentations on a topic of interest.
Meeting Type/Venue:	We aim to meet on the last Tuesday of each month in a private room at a pub in Playhatch. Start time 7pm with members encouraged to meet up around 6pm for a bite to eat / drink before hand, if their diaries allow.
Meeting Frequency/Timing:	7pm on the last Tuesday of the month. Meetings likely to last about two hours but with informal ‘overspill’ before / after.

Group description:	Group focused on active investing, primarily in small / medium cap UK equities.
Meeting Type/Venue:	Regular Zoom meetings interspersed with occasional face to face meetings and social activities in the North West.
Meeting Frequency/Timing:	Monthly on Saturdays at 10am.