Is Discrimination Legal?

Here is something a little different this week. It is still investment related and I venture to suggest that it may be something that will surprise and even shock you. Particularly if you have investments within an offshore fund which makes investments into the UK or perhaps work for an offshore fund!

Long story short, I had the mis-fortune, along with many others of investing into a UK regulated trading platform that went bust. Despite all of the “comforting reassurance” that surrounded the Financial Services Authority (FCA) such as “segregated accounts under the client cash rules” and access to the Financial Services Compensation Scheme (FSCS) should the regulated entity go into “default” the actuality turned out to be nothing more than “comforting rubbish:”

• The FSA were notable in their absence when the liquidator required guidance on which clients were “segregated,” and therefore protected under the client money rules and who were “non-segregated” and shown to the back of the queue of other creditors, such as the UK Inland Revenue. As such the liquidator sought guidance from a civil Judge, who after great cost and further anguish to the creditors, deemed that the majority of them were non-segregated despite being informed otherwise when they opened accounts with the UK regulated entity.

• It gets worse in that after submitting a claim to the FSCS for redress once the trading platform company was placed in default under the UK regulatory rules, it took the FSCS a near six-months to produce a 1-page rejection letter stating that as the investment was made by a Bermuda domiciled mutual fund (actually the term is an OEIC,) which they label as an “overseas financial institution,” it is an ineligible claimant!

As it was a UK regulated entity that went into default, regardless of the reason, surely ALL classes of creditor should be treated fairly and equal under the same rules, otherwise it is akin to saying “if you are below 6 feet in height you are covered, anyone over 6 ft hard luck.” Discriminatory!

Furthermore, if you are an investor into a UK regulated entity via a non-financial services company, even if in say Panama, you’re covered should the regulated entity go into default, whereas IF your investment is held within an offshore fund, whether it’s domiciled within the EU or a British Overseas Territory, you are not. Discriminatory and legal?

As many of you as loyal readers of my are either employed within the fund management industry, either UK or offshore, or are private investors with an interest in market analysis, I have a favour to ask of you:

If you would kindly complete the simple poll [polldaddy poll=9777977]”

As a thank-you I will provide you with the relevant ruling that is buried deep within the now FCA rulebook, thereby saving you the time and effort in finding it yourself. Please provide your email address.

Thank you in anticipation.