Tag: FCA

Biggest Financial Advice Shake-up in More Than a Decade 

 I have just been reading an FT article with the above title. The FCA is to change the regulations about financial advice so that companies can give “targeted advice” but without getting into the costly need to give personalised advice by doing a full customer review. At least that is what I understand it to mean.

What’s wrong with the system at present? Those who most need such advice as they are financially ignorant tend not to get it because it is too expensive. The feeling is that many people are keeping too much cash in savings accounts rather than investing in stocks or bonds that would give better long-term returns.

Will this be a solution? Perhaps but it is not yet clear (to me at least) how this will work in practice and what exactly is “targeted advice”. The details of how this will work have yet to be disclosed.

I would suggest this is a poor solution to the problem. The better answer is to get folks more educated so they make the right choices when investing or saving. Education of the young in schools and colleges is not good enough so they fail to learn how to manage their own money well and how the financial world works.

Did the FCA actually consult those folks knowledgeable about financial matters rather than just those making money from retail investors? I do not recall any such consultations. This looks like an idea thought up by financial institutions to avoid giving personalised advice and will just be a cheap way around the problems that currently exist. It may protect those who currently provide advice from their responsibility to give appropriate advice but that is not what we need.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

New Market for Private Shares – or an Opportunity for Exploiting the Gullible?

The Financial Conduct Authority (FCA) have announced that PISCES, a new market for private (i.e. unlisted) shares will launch later this year. To quote from the announcement: “PISCES is a new type of platform where shares in private companies can be traded. It will open the door to more opportunities for investors, facilitating their access to growth companies. Private companies can tap into a broader range of investors and asset managers and PISCES offers exits for shareholders to sell up. As companies choose to stay private for longer, there is demand for investors to trade private company shares easily and efficiently in an organised marketplace. PISCES meets this demand by allowing secondary trading of these shares. Companies can set the floor and ceiling of share prices, and have a say over who can buy their shares”.

But will there be liquidity in the shares traded on this platform? And will investors get all the information required to make sound judgements about the merits of private companies?

There may just be big new opportunities to promote dubious companies by the wide boys who frequent financial markets.

See https://www.fca.org.uk/news/press-releases/fca-rings-bell-new-type-private-stock-market-growth-boost for more information.

The Investors Chronicle published an article last week entitled “The next 30 years of AIM”. In my view AIM has not been a success, particularly of late. Companies have been leaving AIM because of high listing costs and general reputational concerns (too many AIM companies have turned out to be run by dubious characters, with fraudulent accounts).

Although I personally have had some good successes investing in AIM companies, I have also had some failures which have offset the good ones. I now take great care about investing in AIM companies and never touch new IPOs.

How to fix AIM? Tougher listing rules are required such as longer track records.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

New FCA Investigation Scheme and Blasphemy Laws

The Financial Conduct Authority (FCA) have published a new Enforcement Guide which may improve their performance. Too often investigating potential offences takes too long and progress is hidden from those affected.

The FCA says: “we recognised that our average investigation times were too long. We have focused our portfolio of enforcement cases in line with our strategic priorities and significantly accelerated our investigations. 

Our consultation included proposals for a new investigation publicity policy to provide a measured increase in transparency under a ‘public interest’ test. Following feedback to our consultation, we revised these proposals and limited the resulting policy changes”.

See https://www.fca.org.uk/publication/policy/ps25-5.pdf for details.

Another legal shortfall has been the recent conviction of Hamit Coskun who was found guilty of a religiously aggravated public order offence, namely, disorderly behaviour within the hearing or sight of a person likely to be caused harassment, alarm or distress by burning a Koran.

Mr Coskun said: “This decision is an assault on free speech and will deter others from exercising their democratic rights to peaceful protest and freedom of expression. As an activist, I will continue to campaign against the threat of Islam. Christian Blasphemy laws were repealed in this country more than 15 years ago and it cannot be right to prosecute someone for blaspheming against Islam. Would I have been prosecuted if I’d set fire to a copy of the bible outside Westminster Abbey? I doubt it.”

The Free Speech Union (FSU) has supported the legal opposition and subsequent appeal. See https://freespeechunion.org/

My opinion (being an atheist) is that the law should not interfere in religious matters or any attempts to limit free speech on the grounds that someone might be offended by religious opinions. Please support the FSU.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

A Fool and Their Money are soon Parted

 A fool and their money are soon parted – that ancient phrase came to mind on reading the latest newsletter from the Financial Conduct Authority (FCA). One item noted that “The FCA has brought charges against nine individuals in relation to an unauthorised foreign exchange trading scheme promoted on social media”.

The individuals concerned promoted trading in CFDs via Instagram accounts and had in total 4.5 million followers. The FCA has previously said that 80% of customers lose money when investing in CFDs because of the risks.

There are clearly a lot of fools in this world who follow “influencers” on social media. And this prosecution is probably just the tip of the iceberg with many other cases remaining to be uncovered. See https://www.fca.org.uk/news/press-releases/finfluencers-charged-promoting-unauthorised-trading-scheme

It’s worth following the FCA for the latest news on financial scams but I fear those who fall for these kinds of scheme are so uneducated or inexperienced that they will fall for any get rich quick scheme however it is dressed up. There are so many suckers in this world waiting to be parted from their money that the FCA has an impossible task to stop all the abuses.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

How to Retire Early and Live Comfortably on Your Retirement Funds

The Investors Chronicle ran an article headed “How to retire early” in this week’s edition. It contains some useful tips. As someone who retired from full-time employment at the age of 50 on medical grounds I can make some comments on the subject. I am now 78 so have been lucky in some regards to survive so long and it’s worth bearing in mind that life, or death, can be very uncertain so making provision for an early retirement is always sensible even if you in practice can carry on working to a late age.

The IC article suggests that investing in equities from an early age is helpful and I would certainly agree with that. You can of course get tax relief from investing in pension funds and the best option is to set up a SIPP (Self Invested Personal Pension) with a low-cost provider so that you minimise charges and make your own investment decisions without the charges imposed by fund managers. There is no evidence that most fund managers are any better than randomly picking investments with a pin so it’s not difficult to do as well as them.

To be more specific you need to invest directly in listed companies although if you don’t wish to spend time looking at individual companies then investment trust companies are a second-best alternative.

As the IC article points out, it is possible to “retire early without being on a six-figure salary”. But you do need to live well within your means and live somewhat frugally.

Elsewhere in the IC it is pointed out that the level of savings for most people in defined contribution company pension schemes in the UK is “woefully low” and averages about 8% of salary. This is much less than in many other countries and is insufficient to build a reasonably large pension pot.

A related problem is that many UK pension schemes are too small with high costs. Effectively they provide poor value for money. The FCA are aiming to tackle this problem with a new “traffic-light” system which would rate pension funds. The FCA is consulting on their proposals now to which you can respond – see https://www.fca.org.uk/publications/consultation-papers/cp24-16-value-for-money-framework

You might be wondering how my own pension fund is doing since I have lived much longer than expected. Well it has increased in value over the last 28 years by sensible investment decisions and frugal living so I have been donating more to charities and other good causes. I have also made adequate provision for my wife and offspring. As one gets past a certain age the desire for expensive holidays, meals out, new suits, flash cars and other luxuries does reduce somewhat so that helps.  The “triple-lock” on state pensions also helps of course but medical expenses have also risen although most of those are covered by the NHS.

But the key message is to take control of your own pension provision so as to minimise costs and ensure good long-term investment performance.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

You can “follow” this blog by entering your email address in the box below.  You will then receive an email alerting you to new posts as they are added.

New Listing Rules

The FCA has published a note explaining the new listing rules for public companies. See: https://www.fca.org.uk/news/press-releases/fca-overhauls-listing-rules-boost-growth-and-innovation-uk-stock-markets

They suggest that allowing greater risk permitted by the new rules will better reflect the risk appetite the economy needs to achieve growth. Chancellor of the Exchequer Rachel Reeves said: “The financial services sector is central to the UK economy, and at the heart of this government’s growth mission. These new rules represent a significant first step towards reinvigorating our capital markets, bringing the UK in line with international counterparts and ensuring we attract the most innovative companies to list here.”

Comment: There is some simplification in the new listing rules which is certainly a positive change. But whether the changes will have any significant impact is debatable and much more needs to be done to reinvigorate UK stock markets.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

You can “follow” this blog by entering your email address in the box below.  You will then receive an email alerting you to new posts as they are added.

Globo – A Final Report

Globo was an AIM listed company subject to a large fraud back in 2015 which caused the company to collapse and investors lost everything. Alleged cash on the balance sheet was non-existent. Despite investigations by the FCA and FRC (re the audit) no action resulted.

The FCA have published a final report on the matter which shows that the Greek authorities failed to make anything stick – see https://www.fca.org.uk/news/statements/fca-discontinues-criminal-proceedings-konstantinos-papadimitrakopoulos-dimitris-gryparis

There was never any hope that investors in Globo would recover anything but there are some conclusions to be drawn from this: 1) Do not trust the accounts of companies particularly those with Greek associations; 2) Don’t ignore “short” reports attacking companies – sometimes they are right, although not always.

Do not take any reports from me as being supportive of companies or recommendations to invest in them. My comments on Globo at the time simply reported on what the company said in announcements or at AGMs. If I was sceptical about comments from third parties it was because shorters often exaggerate their case.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

You can “follow” this blog by entering your email address in the box below.  You will then receive an email alerting you to new posts as they are added.

FCA Challenges Cash Interest Charges

The Financial Conduct Authority (FCA) has published a letter sent to platform operators that manage ISA and SIPP funds. They say: “The amount of interest earned by some firms has increased as rates have risen. The FCA recently surveyed 42 firms and found the majority retain some of the interest earned on these cash balances, which may not reasonably reflect the cost to firms of managing the cash. Many also charge a fee to customers for the cash they hold, known as “double dipping”.

As both a customer of a well-known SIPP manager (AJ Bell) and a shareholder in the company that is hardly news to me. Interest on client cash holdings has been a major positive contributor to the profits of investment platforms as they typically pay less interest to the clients than they can obtain from depositing the cash in a bank.

At least that may be true now but a year or two back they were getting minimal interest on deposits and paying little or nothing to clients on their cash holdings.

The FCA seem to be saying that this source of profit is unreasonable and should not be used to cover more than basic operating costs but I am not sure that is entirely sensible. There are a lot of costs involved in operating an investment platform which have to be covered somehow. If not from the “cash margin” then what from?

The key issue is whether the charges applied are fair and apparent to customers, i.e. are they transparent and easily comparable across platforms? They certainly are not at present.

See the FCA announcement here:  https://www.fca.org.uk/news/press-releases/fca-writes-firms-about-treatment-retained-interest-customers-cash-balances

The AJ Bell share price has fallen by over 8% today at the time of writing.

Postscript: No doubt in response to the FCA announcement but probably under consideration for some time, AJ Bell have announced a reduction in charges and higher interest on cash deposits. See https://www.londonstockexchange.com/news-article/AJB/statement-re-pricing-changes/16249079

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

You can “follow” this blog by entering your email address in the box below.  You will then receive an email alerting you to new posts as they are added.

Regulating Cryptoassets

The FCA has published a consultation document on the regulation of cryptoassets – particularly stablecoins in the first instance. It should be of interest to anyone investing in cryptocurrencies or considering doing so. To quote from it:

5.9 If a cryptoasset custodian were to fail today, the lack of a clear regulatory framework could result in uncertainty that would likely cause harm to clients through delays in the return of assets, extra costs or, worst of all, loss of their assets. Without clear regulatory standards to which cryptoasset custodians are required to adhere, cryptoassets may not be safeguarded adequately, which may lead to losses should the cryptoasset custodian enter insolvency (whether due to being treated as assets of the custodian, or through operational errors). In addition to the harm to clients, an outcome that results in uncertainty in insolvency may impact confidence in the overall regulatory regime.

5.10 This was shown in the recent failures of Celsius Network LLC and the FTX group, both of which provided cryptoasset custody services. According to its recent bankruptcy filing, Celsius had misappropriated client assets and at the time of its insolvency owed $4.7bn to customers. In the case of FTX, at least $8bn of client assets were reported to be missing. According to filings in the US bankruptcy court for Delaware on FTX Trading, FTX’s practices included ‘potential commingling of digital assets…use of an unsecured group email account as the root user to access confidential private keys and critically sensitive data…’ and ‘an absence of lasting records of decision-making.’

See https://www.fca.org.uk/publications/discussion-papers/dp23-4-regulating-cryptoassets-phase-1-stablecoins for details.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

You can “follow” this blog by entering your email address in the box below.  You will then receive an email alerting you to new posts as they are added.

IBP Special Administration and Thames Ventures VCT 1

I have a very small holding in Thames Ventures VCT 1 (TV1). This is the remnant of holdings in other VCTs originally invested from 1997 onwards and which have generated a total return of minus 58% to date according to Sharescope although I doubt that is accurate due to multiple consolidations and name changes. I would have sold the holding long ago if it was not for the roll-back of capital gains roll-over relief that would have been incurred.

Now we learn that TV1 held some of its listed shareholdings with IBP Markets Ltd which has been put into Special Administration by the FCA “due to concerns whether there were appropriate systems and controls in place to ensure adequate protection for client monies and client assets at IBP”. About 20% of VCT1’s assets are held by IBP.

More information here: https://www.investegate.co.uk/announcement/gnw/thames-ventures-vct-1–tv1/special-administration-of-the-company-s-custo-/7824992

and here: https://www.fca.org.uk/news/news-stories/restrictions-placed-ibp-markets-limited-and-firm-enters-special-administration

Needless to say this is all bad news. Are the assets still there, and what will the administration of IBP cost and will it be charged against the assets? Those are key questions. Also how long will it take to complete the administration and have the assets released – too long is no doubt the answer.

The whole future of TV1 is also brought into doubt by these announcements. The investment management was transferred recently to Foresight Group who have experience of taking on dead ducks but with net assets of £91.9 million according to the last annual report and the reputational damage from these events some vigorous decisions are clearly required.

Roger Lawson (Twitter https://twitter.com/RogerWLawson  )

You can “follow” this blog by entering your email address in the box below.  You will then receive an email alerting you to new posts as they are added.