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The Security of your Investments
Client Money and Investments held by Charles Stanley & Co. Limited
It is understandable that from time to time we receive enquiries from clients about the security of the funds that we place for them on deposit, and about the security of the investments that Charles Stanley looks after for them.
First, it is important to note that Charles Stanley & Co. Limited is an FCA-authorised firm:
We are not a bank or deposit-taker in our own right. Nor are we owned by a bank or have any significant banking shareholder. Our parent company, Charles Stanley Group PLC which is wholly independent and listed on the London Stock Exchange is not conducting a banking business and is acting purely on your behalf, in arranging for the way in which your money is deposited.
The effect of this is that:
Unlike a bank, we are not using your money in running our own business, nor are we lending it to other clients, nor investing it in anything else. Instead, we are holding it for you in trust, placing it on deposit for you, and it remains your money at all times. Your money is ring-fenced from the assets of Charles Stanley and is kept strictly segregated as client money in accordance with the rules of the FCA.
Where do we place your money?
We pool your money with that of many other clients, and place the entire pool with leading banks and credit institutions. With the aim of increase security for you we don't place the money with a single bank, but divide it between, typically, four or five different banks and credit institutions at any one time. We carry out our own analysis on the banks and credit institutions that we choose, and both the choice and the proportions in which we divide the money are subject to our periodic review and careful selection.
This choice of banks and credit institutions with whom we place clients' funds can vary from day to day. But we believe that you are entitled to know where the money is placed at any given time and will tell you this during business hours whenever you ask.
Are your deposits guaranteed?
The banks and credit institutions amongst whom we divide the deposits do of course guarantee re-payment. But this guarantee is only as good as the bank itself. If it should become insolvent or its assets are frozen or seized by the government, then we will of course make every effort to recover the money. But our own guarantee can only be as good as that of the banks and credit institutions with whom we place the funds. We have received advice from a leading firm of lawyers that the appropriate treatment in such circumstances is to pro-rata the entire pool of funds that we hold for clients so that the effect of any default is proportionately the same for each client.
What is Charles Stanley's status in this?
As explained earlier, we hold funds for clients as their trustee, and we have a fiduciary duty to take good care of it. This is a responsibility which of course we take very seriously indeed. Our Business Terms do however make it clear that ultimately we will not be liable in the event of default by any of the banks or credit institutions with whom deposits are placed.
How am I covered by the official compensation scheme in the event of a bank default?
With certain exceptions, for example larger companies, depositors in banks and credit institutions which are regulated by the Prudential Regulation Authority are entitled to compensation of up to £85,000 (as of 30 January 2017).
You can read more about the compensation scheme on these web-sites:
http://www.fscs.org.uk: Guide_to_work_of_FSCS_Claiming_comp.pdf explains more about the compensation scheme
You may also find the following pages on the FCA website of use:
How about the investments that you are holding for me?
The very great majority of the investments that we hold for clients are registered in the name of our nominee company, Rock (Nominees) Limited, which is wholly guaranteed by Charles Stanley & Co. Limited. As with client money, these assets are carefully segregated from the assets of the company, and are subject to regular checking and reconciliation. We hold the investments in trust for you and they remain your property at all times. In the case of Overseas Shareholdings, Unit Trusts and OEICs we may use other specialist custodians where these investments are held in trust on behalf of Charles Stanley clients. Certain overseas countries may not however recognise the concept of trust or nominees. In such cases, therefore, we have to hold clients' investments directly in the name of Charles Stanley & Co. Limited. We will apply what safeguards we can in these circumstances and, as provided by the rules of the FCA, the FSCS states that the maximum level of compensation for investment claims against firms declared in default on or after 1 January 2010 is £50,000 per person per firm.
In relation to any non-investment insurance mediation business we conduct with you, the amount payable by the Scheme would be 100% of the claim where the claim is in respect of a liability subject to compulsory insurance, or, in all other cases, 90% of the claim with no upper limit.
What about the security of Charles Stanley itself?
Because the money and investments that we look after for clients are held in trust, and are carefully ring-fenced, the position of Charles Stanley itself should not pose a risk to their security. Clients' assets are kept separate from those of the company. Charles Stanley itself is one of the larger UK private client investment firms, with a history of more than 200 years. But in the hopefully unlikely event that we are called on to rectify a problem, then, in addition to the strength of the Charles Stanley Group balance sheet, as a public company, we carry substantial insurance cover at Lloyd's of London.
We hope that this covers all the points that you might wish to ask about the security of your money and assets that you place in trust with Charles Stanley. But if there is any more that you would like to know, please do speak to your usual contact at Charles Stanley, who will be delighted to help.