Regulation  

FCA warns Beaufort investors to expect losses

FCA warns Beaufort investors to expect losses

The Financial Conduct Authority has warned clients of collapsed Beaufort Securities some clients may not receive all their money back despite the administrators slashing their bill.

PwC has agreed to carry out the administration in two years, rather than the four it had originally planned for, which has pushed down the costs of the process from £100m to £55m.

Despite this the FCA, which placed the discretionary fund manager into insolvency earlier this year, has today warned that a number of clients holding larger portfolios may not receive all their money back because the shortfall between the amount the administrators can recover and the amount they had invested may exceed the Financial Service Compensation Scheme compensation limit.

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The regulator said estimated more than 90 per cent of eligible clients who had client money and/or assets with Beaufort were likely to have losses which fell under this £50,000 limit.

Creditors of Beaufort Securities had reportedly complained PwC's initial proposed fee of £100m was unfairly high.

The lower fee of £55m has been agreed after talks between PwC and the creditors.

Russell Downs, a partner at PwC, said: "The administration team has held a constructive and wide-ranging discussion with the creditors’ committee on Wednesday 23 May during which a revised costs estimate of £55m was presented.

"The timescale and associated costs have reduced due to the streamlined process afforded by our proposed distribution plan to clients in September. This is compared to our previous maximum forecast -  which we emphasised was only a reserve estimate based on a four-year process and subject to review."

Mr Downs said the £55m would go towards maintaining ongoing operations including 35 Beaufort staff, office space and related expenditure, alongside the IT infrastructure which is critical to support the client records.

It would also cover the costs of the administrators and legal advisers, and a general contingency and VAT.

The FCA said PwC was working on a distribution plan which will set out the details of how client money will be distributed and it remains the case that the company is hoping to start returning money in September.

The regulator said it put Beaufort Securities and Beaufort Asset Clearing Services into insolvency following an assessment of their financial positions.

At the time the FCA said: "The FCA also considers 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."

Beaufort Securities was declared in default by the FSCS in April.

damian.fantato@ft.com