Tag: Platform transfers

Platform Transfers and Judicial Reviews

I have written about the unreasonable delays in doing a platform transfer of a SIPP previously and on the slow and inadequate response to a complaint to the Financial Ombudsman – see here: https://roliscon.blog/2022/09/02/useless-financial-ombudsman-and-fca-plus-defective-insolvency-regime/

The platform transfer took over 5 months and my complaint to the Ombudsman was commenced in May 2021. I accepted £350 for the delays from one provider and have now received a derisory offer of £50 from the receiving platform as part of a “Final Decision” by the Ombudsman, which I have rejected.

My only options now are to either pursue a Judicial Review of the Ombudsman decision or pursue a direct legal claim. Neither are really very practical. On the grounds of expense and my time involvement for a relatively minor claim it would not be sensible to take either option.

The whole point of a Financial Ombudsman is that it should enable claims to be pursued for failures in financial institutions without going to the expense of a full legal claim. It’s falling down on the job in essence. It also apparently considers a transfer time of over 5 months to be not unreasonable despite the fact that there were clearly avoidable delays and inefficiency in the process by both sending and receiving platforms. The FCA really does need to take up this issue of long platform transfers which are simply anti-competitive. They need to follow Alexander’s example with the Gordian Knot and take a sword to slice through the complexity.

Incidentally a recent publication on Judicial Reviews may be of interest. A Judicial Review is a legal process that enables you to challenge decisions by central or local Government bodies or where the law may have been applied incorrectly by tribunals or other courts. It has been widely used of late by environmental lobbyists to challenge planning decisions but it can also be helpful on other issues. For example an application for a judicial review was made in the Northern Rock nationalisation case.

But they are not always easy cases to pursue because they are not judged on moral principles but simply on the legal technicalities. Cases can be thrown out before they are even heard by judges if they are not handled correctly and do not meet certain criteria. For example cases need to be raised as soon as possible after the issue comes to the attention of litigants or at least within 3 months.

A recent publication by the Courts and Judicial Tribunal entitled “Administrative Court Judicial Review Guide” is exceedingly helpful in explaining what is required and the process that must be followed – see link below. It even explains how “litigants in person” are supported if you do not wish to pay for professional legal representation yourself. And it covers the issue of costs which must be taken into account which litigants may need to pay (and the defendants costs if you lose the case).

Costs can vary wildly. For example this writer has been involved in two judicial reviews. The first was a challenge to the suspension of a hearing in a magistrate’s court on an alleged motoring offence when a key prosecution witness failed to turn up. This cost me less than £2,000 in court fees and my own solicitor’s fees. The case was referred back to the magistrate’s court when the witness again failed to appear so the case was abandoned.

The other was the challenge to the Government’s nationalisation of Northern Rock where legal costs of both sides were several million pounds. The court refused to overturn the decision in parliament by Labour MPs to force nil compensation to shareholders.

One can apply for a “cost cap” to stop the defendants running up enormous bills which Government bodies and Councils can otherwise easily do. And note that if a claim is over an environmental issue then the Arhaus Convention can be invoked to limit costs further. See the Guide in Section 25 for more details.

Although it is possible to pursue a judicial review without legal representation I would recommend that people contemplating a judicial review do take some advice from solicitors familiar with the process. It is particularly worth noting this statement in the Guide: “In judicial review proceedings, the Court’s function is to determine whether the decision or conduct challenged was a lawful exercise of a public function, not to assess the merits of the decision or conduct under challenge. It is therefore seldom necessary or appropriate to consider any evidence going beyond what was before the decision-maker and evidence about the process by which the decision was taken – let alone any expert evidence”.

In summary judicial reviews can be a useful tool for those challenging decisions of a public body but you need to adhere to the rules laid down by the courts including the timescales. The Guide is very helpful in that regard.

Administrative Court Judicial Review Guide 2022: https://tinyurl.com/2sfw4d7p

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

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Useless Financial Ombudsman and FCA plus Defective Insolvency Regime

The stock markets are in turmoil now everyone is back from their holidays and facing up to the realisation that with high inflation and looming recessions the stock market may not be the best place to be for investors. I have moved more into cash and more defensive shares but cash is not the place to be for very long when inflation is eroding its value by more than 10% per annum. Stocks are getting cheaper as the short-term speculators and inexperienced investors exit so there will soon be bargains to be had while there are still few good alternatives when banks are paying less interest than inflation and fixed interest bonds are collapsing in capital values as interest rates rise.

I have written before about how useless the Financial Ombudsman is after I complained about the time it took to complete a transfer of a SIPP from one platform to another – see https://roliscon.blog/2022/04/28/the-financial-ombudsman-is-useless/ . It took over 5 months and I complained to the Financial Ombudsman about the delays in May 2021. After lengthy correspondence and an initial offer from the sending platform which I rejected as derisory, they have accepted that there was an unnecessary delay of 9 days at one stage in the transfer process. The Ombudsman has now proposed compensation of £350 for the inconvenience caused and £139.75 for the loss of investment return. This I have reluctantly accepted although my complaint about the receiving platform is still outstanding.

It has therefore taken 15 months to resolve the complaint which I do not consider reasonable. But the key problem is the Financial Conduct Authority (FCA) not laying down strict rules about the time to complete transfers of investment holdings as they do for bank accounts. Both the FCA and Financial Ombudsman are toothless in essence and do not provide reasonable protection to investors.

ShareSoc has just issued its latest Informer Newsletter to members and it makes for a good read. One good article is on 4D Pharma (DDDD) which recently went into administration. This company claimed to be “a world leader in biotherapeutics” but it was a typical jam tomorrow story company. I never held the shares so I cannot judge whether the claimed prospects were realistic or imaginary but it does appear to have been very badly managed such that it ran out of cash. Unfortunately shareholders have no recourse against incompetent or inept directors.

But the key point to highlight is the typical wildly excessive costs of the administration which has run up costs of over £580,000 in just a few weeks. Shareholders should never expect any return from an administration and this case is no different. There may be some assets (mainly IP) in the business but after the administration costs and settling debts, there may be nothing left.

The insolvency regime needs major reform. At present the big beneficiary of administrations are insolvency practitioners who to a large extent can do what they want and charge what they want. The insolvency regime seems to have been designed for the benefit of the insolvency profession. I suggest the regulations in this area should be totally reformed and administrations should be a court supervised process as per Chapter 11 in the USA.

Another article in the ShareSoc Newsletter is on Blancco Technology Group (BLTG) in which I did hold a few shares for a while. There was a complaint to the FCA about the accounts of this company which were grossly misleading and the auditors (KPMG) have been fined £3,500 with costs of £2,743. A derisory and disgraceful outcome and another example of how weak the financial regulators are in the UK.

Ultimately the cases of 4D Pharma and Blancco reinforce the point that you should never invest in a company unless you have absolute confidence in the prudence and ability of the directors.

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

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Platform Transfer Finally Completed and Pointless Trust Changes

Good News! A transfer of one of my SIPPs from one platform to another has finally been completed today (22nd June). I initiated the transfer on the 12th January this year so this has actually taken over 5 months. A totally unreasonable period of time for what should have been a simple transfer of cash and a few direct shareholdings of UK listed crest stocks. However their failure to collect the tax refunds on PID dividends on some of the holdings remains outstanding and my complaint about both parties involved in the transfer to the Financial Ombudsman is ongoing.

Two investment trusts I have holdings in are Montanaro European Smaller Companies Trust (MTE) and JPMorgan European Smaller Companies Trust (JESC). The latter company has decided to change its name to JPMorgan European Discovery Trust with a new TIDM code of JEDT. Shareholders were not given any say on the matter, although the company says it “had discussions with major shareholders and the wider investor base”. All I can say they did not ask me! If they had, I would have objected.

The company claims the former name was inappropriate as some of their holdings have large market capitalisations but the new one is totally meaningless. There are lots of other investment trusts with out of date and inappropriate names – such as Scottish Mortgage. It’s just pointless changing the name and the new one is a poor choice. Brand recognition is important in naming trusts and changing the name unnecessarily will not help. They could at least have chosen a less bland name.

The other trust (MTE) has decided to do a 10 for 1 stock split. The company gives no justification for the change although the usual excuse for such a change is to improve the marketability of the shares. But who are they fooling? A share split makes no difference to the value of shares held. The current share price is about 1700p but if Berkshire Hathaway can happily get by with a market price of $417,290 why would MTE be bothered?

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

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Platform Transfers – It’s Even Worse Than Thought

I commented last month on an article in Investors Chronicle by Mary McDougall on the subject of platform transfers, and how they are inordinately slow. Despite past efforts by the FCA, the situation does not seem to be getting any better. My latest transfer, which was commenced on the 12th of January, is still not complete. The shareholdings have recently been transferred to the selected new platform but not the substantial cash holding in the portfolio.

But according to the latest article (see link below) by Mary, other investors have even worse experiences. Six months is how long it took in two examples reported to her. Hargreaves Lansdown, who otherwise have a good reputation for service, seem to be no better in doing transfers than other brokers although none seem to be exactly fast. Of course it requires both sending and receiving brokers to act quickly to expedite a transfer so they tend to pass the buck if you complain. See her full article on the link below.

Mary would like folks to send her examples of their own experiences with broker/platform transfers so she can take up this problem with the regulators. Please send her an email to mary.mcdougall@ft.com . Please help her so we can get this problem fixed.

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

Latest Investors Chronicle Article: https://www.investorschronicle.co.uk/news/2021/04/12/time-for-the-fca-to-crack-down-on-platform-transfers/

My Previous Article: https://www.sharesoc.org/blog/brokers/platform-transfers-progress-has-been-pitiful/

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Platform Transfers – “Progress has been pitiful”

There is a very good article in this week’s Investors Chronicle by Mary McDougall on the subject of platform transfers. I have sent her the following email:

Mary,

On the subject of platform transfers, you are quite right to say that “It appears progress has been pitiful”. I have done several such transfers in the past and none has been completed in under 3 months. The FCA initiatives to improve matters has had minimal impact. I am currently still trying to get one completed that I initiated on the 12th of January.

This is a transfer of a SIPP from one platform to another where I already held a SIPP. This was an “in-specie” transfer but it only contained holdings of cash and UK listed Crest shares. No funds or other problematic assets. In other words it should have been absolutely straightforward. But it still required paper forms to be completed and signed. They suggested it would take 12 weeks but I think it will take longer.

The latest hold up is that as I passed the age of 75 in the middle of this transaction the sending platform requires completion of a Lifetime Allowance Test which is also being done by the receiving platform. I am querying why they both need to do it and why that should be holding up completion.

What is really annoying is that both platforms seem to be understaffed to handle transfers, and seem to expect me to do all the chasing required to get the transfers completed. As I have pointed out to them, the FCA Handbook says the brokers “must execute the client’s request within a reasonable time and in an efficient manner”. They are clearly in breach of that rule.

In the meantime, my cash and holdings have been frozen, prejudicing my investment activities.

It is simply unacceptable for transfers to take months. It’s anti-competitive as it deters people from moving to platforms with lower costs or a better service. The FCA cannot fix this problem by exhortation. It needs to look at the wider issue of poor systems and under resourcing of transfers. And it needs to get a lot tougher with the platform industry.

Note that I have not named the two brokers concerned in my latest transfer as I don’t think they are likely to be any worse than others from my past experience. It is an industry wide problem, and needs tackling more vigorously.

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

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Invinity Open Offer, Ideagen, and AJ Bell Results

I have recently taken a strong interest in those shares that are involved in electrification of the world. It’s not just the UK Prime Minister who wants to save the world from global warming and air pollution with Joe Biden likely to be much more environmentally conscious than Donald Trump. Those companies or trusts that are involved in alternative energy sources such as wind and solar, and systems to manage the fluctuations they impose on the grid, are of particular interest.

One such company is Invinity Energy Systems (IES) who announced a placing and open offer this morning. This was a company that was mentioned at a recent investor discussion group I attended and I did some research into it and bought a very few shares.

It produces vanadium flow batteries which are typically large batteries used in large energy storage projects. They are alternatives to lithium-ion batteries which have limitations and lithium is a relatively rare element that we might run out of or it might become very expensive. Vanadium is the 20th most abundant element in the earth’s crust and is mainly used in steel making at present. Vanadium flow batteries have advantages in that they can be cycled many times, have a 25-year lifetime, with no risk of thermal runaway and are cost competitive. They have been around for many years but not in high volume production mainly because they are bulky and hence only suitable for certain applications – Invinity plan to change that. It’s still a relatively early stage business but it seemed worthy of a punt as their sales prospects, of which details are provided, look promising.

Their placing is at a discount of 8% to the pre-placing market price and dilution is only 16% so I consider that acceptable and the other good aspect is that they are including an “open offer” so existing private shareholders can participate.

For those interested in the environmental sector the following shares may be of interest (Note: I hold some of these): Gore Street Energy Storage Fund (GSF), Greencoat UK Wind (UKW, Gresham House Energy Storage Fund (GRID), Impax Environmental Markets, (IEM), Octopus Renewables Infrastructure Trust (ORIT) and The Renewables Infrastructure Group (TRIG). Some of these are effectively private equity trusts that invest in storage systems, windfarms and solar power installations. Much of their revenue comes from guaranteed prices for power supply and their assets are valued on a discounted cash flow basis. This enables them to pay high dividends with some capital growth but they are currently typically trading at a high premium to net asset value as they have grown in popularity as good reliable dividend payers have disappeared from the market. Whether the assets are fairly valued is anyone’s guess and clearly it depends on what discount rate is used – never an easy thing to determine in DCF calculations.

There is a lot of enthusiasm for these companies in the market at present so readers need to decide whether it is a bandwagon that will fade or grow stronger.

Last night I attended a webinar on Ideagen (IDEA) run by ShareSoc. I have held this company since 2012 and it has been highly profitable but one aspect I am unhappy with is that they regularly do placings, typically to fund acquisitions, but never include open offers, so I have been diluted. As Chairman David Hornsby said last night, they do at least only do placings at near the market price, but I am not convinced that is a good excuse. Market cap of Ideagen is £500 million while that of Invinity is £138 million so if Invinity can include an open offer why cannot Ideagen?

From David’s other comments it seems they are planning a placing to enable them to do more acquisitions to meet their growth plans. That might be why the share price has been drifting down of late as expectations of this have become known.

AJ Bell (AJB) announced their final results this morning (they run the YouInvest platform). Revenue was up 21% and pre-tax profit was up 29% but on a forecast p/e of 48 according to Stockopedia for next year the price is clearly discounting more growth but there must be limits on how much market share they can grab.

One interesting item mentioned in the AJ Bell announcement was that the FCA has delayed implementation of the “Making Transfers Simpler” rules due to the Covid-19 epidemic. The new rules were designed to make transfers between platforms easier so as to encourage a more price-competitive platform market. Let us hope these changes are not abandoned although AJ Bell mention they feel the new rules could be improved and have made alternative suggestions.

As anyone who has moved an ISA or SIPP between platform operators knows, it takes way too long and is too expensive. The FCA’s new rules may have helped in some regards but are not a total solution.

At least AJ Bell have substantially reduced their exit charges in their new price list effective from January. They have made a number of other changes to their prices which overall do not seem unreasonable and they will remain competitive.

Platform operators have generally been edging up their prices as the interest they receive on client cash has disappeared as interest rates have shrunk while regulatory costs have increased. This has also undermined the few “free dealing” platforms that wanted to conquer the UK market like Robinhood have done in the USA with commission free trading. Operators such as Freetrade were potentially a threat to AJ Bell but with the former offering only a limited service that threat seems to be receding.

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

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