Pigheadedness at large

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Pigheadedness at large

I was a bit surprised by a story in yesterday’s Sunday Telegraph to the effect that the total assets falling to be distributed by the administrators of Beaufort Securities was of the order of £500 million to £850 million but that the fee charged by PwC for this would be of the order of £100 million.


So I contacted a chum, a former stockbroker, who has money at Beaufort, and he agreed with me in having thought that this was a typo or some such. Nonetheless he put me on to some central character on the Creditors’ Committee who comments that the eventual figure will be much less and that in any event payments have to be approved by the Court. I should jolly well think so. Even so, I fear a staggering bill in relation to the assets falling to be distributed.

*****

I went over the outline of the case brought by Clear Leisure (LON:CLP) against Mr Justin Cooke with a member of the CLP management team. Mr Cooke sold a company to a subsidiary of WPP in 2012 where CLP had a stake – this stake is not yet clear. Astonishingly, the then CEO of CLP, Alfredo Villa, seems not to have followed through the receipt into CLP’s bank account CLP’s share of the proceeds. It seems to have been a sum of the order of £700,000 to £5 million. The real question is whether Mr Cooke has any money now to pay what should have been paid six years ago. Apparently, he has a number of governmentally sponsored appointments. Bankruptcy will surely put an end to those.

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Anyway, notwithstanding the uncertainty and the delay, I bought a further 2 million CLP. I’ll soon own the company in entirety simply through pigheadedness.

Comments (1)

  • Compounder says:

    Broken fences

    John Hughman

    Investors Chronicle

    11 May 2018

    https://www.investorschronicle.co.uk/the-editor/2018/05/11/broken-fences/

    I received an email from a reader this week urging us to look at the case of Beaufort Securities, the UK stockbroker that collapsed in March after a US Department of Justice investigation implicated the company in securities fraud.

    According to the administrators, PwC, Beaufort holds around £500m of client’s securities and another £50m in segregated client money. There’s no suggestion that any investor money has gone missing, so in theory there shouldn’t be any problem getting 14,000 investors their assets back – even if that may take some time, and will mean the cost of lost opportunity.

    So, aside from that irritating inconvenience, what exactly is the problem? The answer is that even though all the money is where it should be, and the records of who owns what are in place, there may still not be enough in the pot to give everyone their shares back. 700 clients with assets valued at over £150,000 could find themselves nursing as much as a 40 per cent loss of their portfolio.

    How, given the assets are ring-fenced, is that possible? Look no further than the cost of the administrator: PwC has said that its fees will be in the region of £100m, and that legal precedents mean it can dip into client assets to pay itself and other advisers involved in the administration.

    For one thing, that does seem an extraordinarily high figure in the context of the overall amount of funds to be returned. Our reader suggests that the cost of simply transferring ring-fenced nominee accounts to another provider should be much lower, a point also made by ShareSoc, which is mounting a campaign to present a legal challenge to the administrator’s proposals. “[PwC has] provided no justification of either the amount or timeframe for the simple task of transferring an electronic registry of client assets/money to one or more replacement brokers,â€￾ it argues.

    More worrying is what this means for the idea of ring-fencing – in short, it suggests a principle not worth the reams of legal paper it’s printed on, a point made by the excellent FT columnist Lord Lee in Parliament, and reiterated by ShareSoc, which says that “the suggestion that PWC as Special Administrator can seize client property and treat the owners as creditors of the failed entity makes a mockery of regulatory protections for investors in the UKâ€￾. I fully concur and urge those affected to sign up to ShareSoc’s campaign (https://www.sharesoc.org/campaigns/beaufort-client-campaign/).

    I would add one further point: in an age where we are increasingly expected to take control of funding our own retirement, the UK’s investor compensation scheme is simply no longer fit for purpose. We regularly see pension investments in our portfolio clinic worth over the £50,000 compensation limit, and spreading them across providers is utterly impractical. By contrast, the equivalent US scheme protects assets worth up to $500,000 – and if the UK government is serious about promoting self-directed retirement saving, it should do the same.

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