Wednesday, 02 May 2018 06:44

Beaufort Collapse Reveals Stockbroking Ain’t No Oil Painting

It sounds like something out of a Hollywood gangster film - a $50 million fraud, an attempt to launder the proceeds by buying a Picasso painting, and an undercover FBI agent who foiled it all.It sounds like something out of a Hollywood gangster film - a $50 million fraud, an attempt to launder the proceeds by buying a Picasso painting, and an undercover FBI agent who foiled it all.

But no, this is a real-life story. In place of gangsters, you can substitute stockbrokers whose crime was illegally fiddling share prices in a worldwide scam. After being caught red-handed, their actions led to the collapse of the firm they worked for, London-based Beaufort Securities, which was declared insolvent by the Financial Services Authority (FSA) in March.

It is not the first time rogue traders have brought down a large financial services institution, of course - remember Nick Leeson and Barings Bank, anyone? But it does underline how the world of high finance continues to have a murky underbelly that the so-called authorities seem powerless to rein in.

And in the meantime, we are all exposed to the fall out.

Investment Risk

As the intermediaries who manage investments in the stock market, stockbrokers wield an enormous amount of financial clout. If you dabble in a few stocks and shares as a private investor, you should be very concerned about brokers acting in flagrantly irresponsible, immoral and illegal ways which jeopardise your investments.

But worse still, stockbrokers also manage the investment portfolios for hundreds of thousands of companies, who in turn employ millions of ordinary people. Amongst other things, anything untoward happening with corporate investment portfolios puts your pension at risk.

Content continues below

Pay promptly for Small Business Saturday

This Saturday December 6th is Small Business Saturday, an annual initiative to support small businesses throughout the UK, and it's not just about visiting your local independent gift shop. Much of…

Flybmi Collapse Sounds Alarm Bells for Airline Suppliers

Another week, another tale of company administration, job losses and suppliers facing an anxious wait on whether they’ll ever get anything back on unpaid invoices. The collapse of Flybmi, the small…

Unpaid Invoices to blame for a fifth of SME failures

We often warn that late payment can be more than just an inconvenience for many small firms, as the interruption to cash flow can put them at risk of failing to pay their own debts, bills and…

Lancaster Castle restoration "on hold" as contractor goes in to administration

Work has stopped on the restoration of Lancaster Castle after the company working on it was placed into administration. York based William Anelay Ltd, one of Britain’s oldest heritage restoration and…

The fall out from the Beaufort debacle will be considerable. Administrators at PwC have already written down the value of the company from £800m to £500m - wiping off a cool £300m from assets available for recovery to creditors. 

That means the Financial Services Compensation Scheme (FSCS) is likely to have to step in. The FSCS protects investments in regulated schemes up to a value of £50,000, providing valuable insurance for small investors. It is paid for out of a levy from the financial services industry. The FSC has already raised its latest levy in anticipation of claims arising from the Beaufort Securities collapse, plus the scandal of botched pensions investment advice given to British Steel workers.

However, the £50,000 protection limit will not cover all losses arising from the Beauforts insolvency. Although PwC optimistically says it expects “the substantial majority” of clients to recover their portfolios in full - at a cost of £100m, we might add - it also concedes that around 700 investors with holdings in excess of £150,000 will probably lose more than the £50,000 FSCS compensation limit.

Let’s hope your pension scheme isn’t one of them.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

Image "Police Car Lights" by flickr user “Scott Davidson” is licensed under CC BY 2.0

8:00 - 20:00

8:00 - 20:00

Our Opening Hours Mon. - Fri.

+44 (0) 1772 454505

+44 (0) 1772 454505

Got questions? Call us today. No hard sell, guaranteed. 

© Safe Collections is a trading name of Safe Collections Limited. Incorporated 1984. Company Number: 01815264. VAT Number: GB407358159. All Rights Reserved.