(Closed) Questions for PwC on the 10th May


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3 months ago by
This thread is to organize and create a logical set of questions for which we do not already have answers.

These questions can be put to PwC on the 10th May in order to save and make the best use of the little time clients will have at the BACSL meeting.

Questions away!
Community: Beaufort Clients

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Past due date

written 11 weeks ago by Nandish  

3 Answers


3
3 months ago by
A few thoughts:

Q1 - If assets are substantially there, why don't the FCA top them up and auction the client base out to another broker? Then there is no FSCS compensation to pay (saing up to £100m), and FCA might even make a profit by selling the client base. The length of administration proposed just eats up our life savings on admin fees which is not acting in our best interests, and possibly not the FCA's, only PwC's.

Q2 - Why should clients pay the redistribution? The FCA has apparently failed to regulate a regulated company and their actions have caused this situation and in my opinion they should foot the bill of costs rather than faultless hard-working savers and the reputation of the UK financial system. It was FCA's decision to put Beaufort down, how is it protecting our interests to deny investors liquidity for a year and to back a significantly costly administration which they will not have to pay for entirely seemingly?

Q3 - £100m administration costs is absurd, but let us say it is £100m out of £550m of assets. That is below 18% costs:assets ratio. Why do you say 40% could be lost? This implies those with larger portfolios could be made to pay a greater portion of their portfolio value to the costs than those with lower portfolios which actually contradicts what PwC said in their last letter ('higher portfolios contribute more £ to costs but a lower % of their portfolio'). If the method implying 40% loss to 'higher-portfolio-clients' was used it would simply be shifting costs from FSCS to these 700 blameless investors based on an arbitrary sliding scale which seems to serve no other purpose other than to save FCA money at our expense based on the latest set of communications. If this were so it does not seem great objectivity or integrity from PwC given the FCA appointed PwC. I would have thought costs would be spread evenly or even to help higher portfolio clients as the smaller clients will be covered by FSCS anyway.

Q4 - If there are client losses, and I sincerely hope there will not be, will losses be tax deductible? I imagine the answer will be deferred to HMRC, but has this been pursued yet?

Q5 - I may lose my deposit on a house purchase due to no longer having liquidity of my assets, what cover can be provided to cover client's for knock on financial losses due to FCA's decision to close Beaufort down at short notice and PwC's proposal to freeze assets for up to a year?

Q6 - More information should be provided on ISA status, tax crystallisations, loss of market exposure risk, dealing fees and duplicated SDLT?

Q7 - Will loss of cash be covered by the FSCS £85k? This cash was held in UK banks presumably? Other stock brokers such as Hargreaves Lansdown are telling me in the event of their default that this is so.

Q8 - The value of assets was reduced down to £550m from £900m due to some securities being found to be illiquid. If those who invested in illiquid securities' portfolios are deemed to be much lower then they effectively are not bearing as much of the costs. Why should those who invested in more vanilla assets be punished for this by being allocated more costs? Those who only invested in FTSE listed companies etc (liquid assets) should not have to cover those who invested in nil-value assets.Please explain how the valuation came down by over a third and give an example?

Q9 - Question to the FCA - was the administration put out to tender? If not, I suggest this is an option as £100m is clearly way higher than anyone is currently willing to entertain.

Q10 - £100m would pay 250 employees £100k a year for 4 years! Can PwC explain what recovery rate they have applied to their hourly charge out rate in coming up with the £100m budget? I understand 60-70% of hourly rate is applied to corporate clients etc, in this situation where there is no tender will PwC be able to provide their budgeted cost breakdown?
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3 months ago by
Alex T  
Great summary.

Specifically on point 2), the law (SAR reg 19A) states that any costs which do not relate to the pursuit of Objective 1 are recoverable only from the firm’s own assets. Objective 1 is to ensure the return of client assets (including money) as soon as is reasonably practicable.

Assuming that the company had virtually no assets, and that the effort to wind up the company and deal with regular creditors is not effort-free, presumably either PwC are doing that work for free or are trying to charge that work to us, which clearly is against the letter of the law.
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3 months ago by
Q7 - Will loss of cash be covered by the FSCS £85k? This cash was held in UK banks presumably? Other stock brokers such as Hargreaves Lansdown are telling me in the event of their default that this is so.

No, it won't be. It's an aggregate 50k covering both client money and assets.

Alex T,

Assuming that the company had virtually no assets, and that the effort to wind up the company and deal with regular creditors is not effort-free, presumably either PwC are doing that work for free or are trying to charge that work to us, which clearly is against the letter of the law.

From what was discussed at the meeting today, PwC did 'confirm' that they will only charge clients for the work of Objective 1. This is still up for debate, but I believe that our preferred committee will make it a top priority to police their activities and make sure we only pay for Objective 1.
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