We have covered the Beaufort Securities story extensively on ValueTheMarkets since the explosive news dropped last Friday. It’s too early for definitive answers regarding the safety of client funds – which we discussed in an article here – but so far there is no indication that any theft has occurred. There are however other potential implications for Beaufort’s retail clients to be aware of. One of these relates to open “T-trades” on extended settlement.
Having consulted with a number of professional contacts and re-examined what happened after Hume Capital’s collapse, it appears that all open T-trades will simply settle on the settlement date. Since these trades were legitimately opened before Beaufort went into administration, the rules of the London Stock Exchange are clear that the trades stand (see under Rule 5000, Obligation to Settle).
Beaufort clients will not be able to roll any trades as their accounts are frozen. If the T-trades entered into are profitable then any profit will be booked to the client’s account and released once PWC, Beaufort’s administrator, releases all other client assets.
If the T-trades lose money then any loss will be deducted from the client’s account. If the client does not have sufficient funds or assets to cover any loss resulting from such trades then the administrator could have a claim against those clients. Whether the administrator pursues such claims remains to be seen.
Further guidance on this issue can be sought from the helplines below.
PWC helpline number:
UK – 0800 063 9283
International – +44 (0)20 7293 022
FSCS freephone number:
0800 678 1100 or 020 7741 4100
FCA freephone number
0800 111 6768 or 0300 500 8082
Author: Ben Turney