Finspreads (no Compensation)

FINSPREADS NO COMPENSATION ON YOUR ACCOUNT MONEY ?


Just received this from finspreads, by reading it you will get the Gist of the problem ! In other words the money they hold in my account will be segregated, but they could put it in a “ s**t” foreign bank (or other ?) and it will not be covered for any compensation by them (finspreads) and will only be covered (or not) by the recipient bank (or other) providing they have compensation rules !!!!

Now that it is explained.... on ringing finspreads.... they will not tell me (or anyone) where my segregated money will be held. Not knowing this I am unable to make a judgment as to the safety of my account.

THEREFORE IT IS “GET-OUT” TIME.....DONT YOU THINK ????

QUOTE –

CLIENT MONEY AND ASSETS

22,1 Any money you transfer to us, or which is transferred to us on your behalf, which is client money within the meaning of the Client money rules will usually be held with a bank in the United Kingdom. Your money will be segregated from our own money in accordance with the requirements of the client money rules and in the event of our insolvency; it will be excluded from our assets.

22,2 We may hold client money on your behalf in an account with a bank or third party located outside the European Economic Area (“EEA”). This account will be segregated from our money or assets which may be held with the bank or third party, The legal and regulatory regime applying to any bank or third party will be different from that of the United Kingdom and in the event of the insolvency or equivalent failure of that bank or third party, your money may not be as effectively protected as if your money is held with an equivalent bank or third party in the United Kingdom.

22,3 We will not be liable for the failure or insolvency of any bank or third party holding money under clauses 22.1 or 22.2 . However, if your money is held within an EEA country. A proportion of your cash balance may qualify for compensation arrangements in that jurisdiction

I had the same amendment to the T&C from TD Waterhouse Spreadbetting who are in the same stable as Fins (aka City Index).

Now excuse me CityIndex for getting straight to the point here but these extra T&C appear so one sided that it's hard to believe that they are being added.

I've never been paid a penny in interest (on my account balance) by Finspreads or TDW. This means that by holding accounts offshore they are looking for a better return on YOUR money than UK based banks will give. Ultimately they don't pass this better rate of return on to the client but pocket the money themselves. Now, so far as I can see, these new T&C's are an attempt by the Firm to pass the higher risk of these 'offshore investments' onto the client. How can this be deemed as being fair on the Firm's part since they don't pass the rate of return onto the client? In otherwords, they take all the profits while all the risk passes to you.

IMHO these new terms are BS and should not be allowed. If the Firm wants to pass this risk onto the clients then they must show that the client is better off because of it. Since they don't pass any of the returns to the client they cannot demonstrate this.

This is a job for the FSA.

Steve.

stevespray said:

I had the same amendment to the T&C from TD Waterhouse Spreadbetting who are in the same stable as Fins (aka City Index).

Now excuse me CityIndex for getting straight to the point here but these extra T&C appear so one sided that it's hard to believe that they are being added.

I've never been paid a penny in interest (on my account balance) by Finspreads or TDW. This means that by holding accounts offshore they are looking for a better return on YOUR money than UK based banks will give. Ultimately they don't pass this better rate of return on to the client but pocket the money themselves. Now, so far as I can see, these new T&C's are an attempt by the Firm to pass the higher risk of these 'offshore investments' onto the client. How can this be deemed as being fair on the Firm's part since they don't pass the rate of return onto the client? In otherwords, they take all the profits while all the risk passes to you.

IMHO these new terms are BS and should not be allowed. If the Firm wants to pass this risk onto the clients then they must show that the client is better off because of it. Since they don't pass any of the returns to the client they cannot demonstrate this.

This is a job for the FSA.

Steve.

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QUITE RIGHT STEVE...its time for FSA rules to be changed as to where these people can actually hold "segregated" money.. and who actually owns it .. its not good if they choose to hold it in a bank or other place with little compensation rules. Im looking elsewhere at this very moment for another account..hope they are not all the same though..trouble is reading every bit of fineprint for each SB company may take time. have already instructed finspreads to close my account...

For what it's worth, in Singapore, the regulators insist that Singapore Dollar funds held on a segregated basis are held with a Singapore regulated bank in a local account.

It would make sense that the FSA required all GBP amounts to be held ina British bank, and Euro deposits to be held in Euroland or the UK.

In my opinion the rules may already exist - I'll try and explain....

Any firm which is FSA regulated has a 'duty of care' towards clients. They must treat their clients fairly. Consider that the firm does not financially reward the client for holding funds in a bank account - instead the firm keeps any monies earned for themselves. Since the client gets no reward the firm must surely act in a manner which ensures that the clients funds are placed in an account of maximum safety. The firm appears to be acknowledging that this is not the case - it acknowledges that the funds maybe placed somewhere with lesser / no protection. How can this be advantagous to the client? Answer : It can't!

The extra T&C's are therefore an attempt to limit the firms liability whilst placing an increased liability on the client - the client is now responsible if the firm, in seeking to financially benefit itself, misjudges the risk of it's investment - imho this is an unfair term or condition - the firm could place client funds in a safer place and, because the firm pays no interest to clients, the client would be no worse off - the firm is therefore not only seeking to gain a financial advatage by offsetting its risk but failing to act in the clients best interests.

ns1000 said:

For what it's worth, in Singapore, the regulators insist that Singapore Dollar funds held on a segregated basis are held with a Singapore regulated bank in a local account.

It would make sense that the FSA required all GBP amounts to be held ina British bank, and Euro deposits to be held in Euroland or the UK.

Click to expand...

Good point !... At finspreads Now.. what is the point of being fortunate to be able to win money in the first place..then have it "snatched away".... you have to have an account margin, so that money is at risk all the time whether your trading with it or NOT

EDIT--UPDATE
FINSPREADS have just contacted me saying there "holding" account is with Barclays, But they have refused to assure me that it will NOT be put elsewhere (as it could be. according to there clauses), as far as they are concearned it is "at there judgement" as to where these funds are to be held (anywhere in the world) I was asked if I still wished to close my account..my reply.... even more so !

stevespray said:

In my opinion the rules may already exist - I'll try and explain....

Any firm which is FSA regulated has a 'duty of care' towards clients. They must treat their clients fairly. Consider that the firm does not financially reward the client for holding funds in a bank account - instead the firm keeps any monies earned for themselves. Since the client gets no reward the firm must surely act in a manner which ensures that the clients funds are placed in an account of maximum safety. The firm appears to be acknowledging that this is not the case - it acknowledges that the funds maybe placed somewhere with lesser / no protection. How can this be advantagous to the client? Answer : It can't!
.

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Wouldn't a counter argument be that if client funds are segregated, the interest earned on them is payment for the company borrowing (at a higher rate) to post margin with an exchange to hedge? The money posted with exchanges is probably less safe than held in a regulated bank.

I do agree though that the interest rate differential between banks is so small that the attractions of holding funds in a decent bank should outweigh the increased profit.

ns1000 said:

I do agree though that the interest rate differential between banks is so small that the attractions of holding funds in a decent bank should outweigh the increased profit.

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Correct - But if they can offset the 'risk' (and make it client risk and not their risk) then it's free money for them.

One also wonders how retrospective this is?

I mean, do they have a loss already? These new T&C's come into force on Oct 23rd. One imagines that they hold a considerable sum of client funds in differing accounts. The very nature of funding an account means that clients may go many months without ever making a withdrawal. When the new T&C's come in will the firm be able to retrospectively cover losses which it may or may not have already made (Iceland for example).

The other matter of concern here is that City Index/ Finspreads are only segregating that portion of the clients funds which are not used for margin purposes. The portion of funds on deposit which are used for margining purposes are no longer segregated & are pooled together for City/ Finspreads to do whatver they want with, which means that if a particularly bad trade or number of trades took the company under, your funds would disappear along with the company!

I think these terms are unusual & very concerning for a spreadbetting company. I have not found these terms with any other company I have looked in to. Along with the fact that they are demanding ever increasing margin rates, which means you have less & less in the way of segregated funds, the overall picture becomes even more concerning.

I believe CMC use the same 'segregation' of funds.