Quote from VATcal on 17/03/2024, 13:36

Imagine logging in to your online trading account and seeing a worrying message: your stockbroker has gone bust. While this might seem like a financial nightmare, there are measures in place to protect UK investors. Here's a breakdown of what to expect:

Safety Net for Your Shares:

• Thankfully, your actual holdings (stocks and shares) are typically held safely with a custodian, separate from the broker's assets. This means they are not at risk of being seized by creditors.
• The Financial Conduct Authority (FCA) requires brokers to segregate client assets, ensuring your investments remain yours even if the broker faces financial difficulties.

Transferring Your Holdings:

• The FCA will appoint a temporary administrator to oversee the failed brokerage. This administrator will work to transfer your investment holdings to a new broker.
• You might have a choice in selecting a new broker, although in some cases, the administrator might choose a suitable alternative for you.
• There may be a temporary delay in accessing your account while the transfer is underway, but the ownership of your shares remains secure.

Compensation for Cash Held:

• Cash held in your trading account isn't as secure as your shares. However, the Financial Services Compensation Scheme (FSCS) offers protection for up to £85,000 per person.
• This means if the brokerage owes you cash exceeding £85,000, you might not be fully compensated.
• You'll need to file a claim with the FSCS to receive any compensation.

What to Do if Your Broker Goes Bust:

• Stay Calm: Don't panic sell your investments. The administrator will handle the transfer process, and your shares should remain safe.
• Monitor Communications: Keep an eye on official updates from the FCA or the administrator regarding the situation and your options.
• Consider a New Broker: While the administrator finds a new home for your holdings, you can research alternative brokers for future investments.
• Claim Compensation: If you have cash held with the broker exceeding £85,000, be prepared to file a claim with the FSCS.

Remember:

• It's always wise to choose a reputable and well-regulated broker when investing.
• Regularly review your account statements and understand how your broker handles client assets.