Financial Services Compensation Scheme  

Clients of SVS Securities to reclaim cost of transfer

Clients of SVS Securities to reclaim cost of transfer

Administrators of wealth manager SVS Securities have given hope that the "vast majority" of its clients will be able to reclaim the cost of transferring to another broker from the Financial Services Compensation Scheme. 

SVS Securities fell into special administration in August after the Financial Conduct Authority identified "serious concerns" about the way the business was operating, with the regulator warning some clients were paying fees and charges as high as 20 per cent of their total investment

In an update last month, the administrators at Leonard Curtis Business Rescue and Recovery confirmed more than 100 firms had been in contact about a transfer of the wealth manager's business and client money to their own companies.  

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In proposals which went live on Companies House today (October 9) the administrators confirmed the "quickest and most cost effective" way to return assets and money to SVS clients would be to transfer business to one or more of the interest regulated brokers. 

Leonard Curtis confirmed in the proposals they had received "indicative offers" from 11 FCA-regulated firms regarding a "potential wholesale or partial transfer". 

But the administrators said the cost of this process would be "material" and ultimately paid out of custody assets and client money, meaning customers would therefore face shortfalls as a result of SVS entering into special administration. 

Leonard Curtis said: "The administrators are currently exploring, together with the FSCS, the most appropriate basis and methodology for allocating the time costs incurred returning custody assets and client money.

"At present, the administrators propose that those costs  will be levied as a percentage of client money and as a fixed, capped amount for each transfer of custody assets. This basis will be subject to agreement by the creditors' committee.

"The administrators are working closely with the FSCS to streamline the process for clients' claims for shortfalls arising on their custody assets and client money through cost levies.

"Where eligible clients would otherwise experience a shortfall value of up to £85,000, for example the cost of the transfer of their custody assets and or client money to a nominated regulated broker, the FSCS will seek to provide compensation in respect of eligible clients without it being necessary for a claim to be submitted in most cases."

The administrators said they expected the "vast majority" of clients to be fully compensated by the FSCS for any costs of transferring their custody assets and money. 

But they warned there might be a "small number" of clients who may face shortfalls in their funds, either because they are not eligible for FSCS compensation or because their loss exceeds the FSCS compensation limit of £85,000. 

According to its records, SVS holds £278m in custody assets and in excess of £23.7m in client money across 12,000 retail clients and 6,000 foreign exchange clients. 

However because of the "highly illiquid" nature of the securities in which custody assets were invested, especially in relation to bonds, the administrators said the value remained uncertain.