Fractional shares + FCA Protection

In the unfortunate event InvestEngine goes bust, can you confirm what FCA protection is offered?

  • if I own whole shares they are titled in my name? And I still am the sole owner?

  • what happens to the fractional shares, who is the owner of the whole share? Does the fractional share count as a deposit under the FCA protection? Should I assume that fractional shares would be liquidated and returned to the owner and not a IE creditor?


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Hi, my interpretation:-
FCA covers loss up to 85k in the case of a business failure.

IE is required to ring-fence our investments from its operating business, so they cannot be used to cover business debts, and survive if IE ceased trading.

For the whole shares we own fractions of - IE owns them, though they are ring-fenced too. If they were used to cover debts, again the FCA is obligated to cover our (partial) losses.


We hold all client cash in pooled client bank accounts at NatWest Bank Plc and your investments in a pooled client account at CREST (operated by Euroclear UK and Ireland). These are segregated from the firm’s money and investments.

InvestEngine and its third party partners have no legal right to your money and investments and we cannot use them to cover any of InvestEngine’s obligations.

This means that in the unlikely event that either InvestEngine or Euroclear UK and Ireland go bankrupt, your investments will still be protected. We are also authorised and regulated by the Financial Conduct Authority.

Your investment of up to £85,000 may be eligible for the Financial Services Compensation Scheme (FSCS). Please follow this link for more information.


Can I just ask why there’s so much smoke and mirrors when it comes to FSCS protection? You ‘may’ be eligible for compensation. I know this is not your fault IE as it’s the wording you have to use.

But why does the FCS/FSCS always say ‘may be eligible’ even when I search financial firms it pretty much says the same thing for all. Are we supposed to lose all our money to find out what actually happens? If you lose all your money they just turn round and say ‘oh because of XYZ you aren’t eligible’, if I knew about XYZ beforehand I’d base my decisions on it.

My understanding why it is carefully-worded @mikea: FSCS only covers UK firms and UK-domiciled OEIC funds - so not generally ETFs and their providers (eg. in the unlikely event the iShares boss disappears with our ETF money, it is our hard luck).

So, if I wanted full FSCS coverage for all my money, I would :-

  • Only put money in UK cash ISAs; and in UK-registered S&S ISA platforms that provide conventional funds, avoiding ETFs.
  • Not put more than £85k in any one firm - that includes the platform investing via and the firm running the fund (eg. not more than £85k total across the various Vanguard funds - not their ETF range though).
  • Only use UK-based investment platforms, and only buy UK-domiciled funds, (such as HSBC FTSE All-World, looking for those with GB in their ISIN numbers gives a good clue).
    Hard to find sufficient differentiated, low-cost platforms and funds if you have built up a larger pot though.

It implies IE money is covered if it is sitting in cash, or if there is (unlikely) criminality in IE and your £85k wasn’t really invested in the ETFs we were told it is (The ETF shares are ring-fenced of course, but that doesn’t guard against the iShares boss doing one).

I do have money in ETFs via IE, though only some of it - via large firms that replicate core indices.
NOTE: these are my interpretations. As ever, do your research.
this was a useful source in my research

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So my assumption is in the event of insolvency, the £85k compensation doesn’t apply as it’s not a deposit (cash). If someone acquired the business there would be a higher chance of recovery. In the event of it being winded down, recovery of funds would take a considerable time as the administrator/FCA would have to sell every share and give us our monies back. If there had been a swindle then probably recovery would be difficult or done at best efforts.

My view a bit different :-
IE insolvency: our investments are ring-fenced from the operating business. FCA persuades another platform to take over, rather than selling (as it is easier). New platform doesn’t do fractionals so we get cash for fractions. Funds are inaccessible during transfer - takes some weeks/few months?
It is true that the ETF shares could be sold off though and the cash transferred to another ISA provider, which could take a while.

Unlikely event of a swindle perpetrated within IE: 85k off the FSCS, as IE is regulated.

Unlikely event of a swindle within an ETF: no FSCS compensation for affected monies.

ETFs could collapse for higher-probability reasons though (eg. counter-party insolvency for a synthetic ETF). So it is worth knowing what the FSCS doesn’t cover.

Advice from FSCS website “Ask your firm to confirm that the activity it is carrying out for you is a regulated activity and under what circumstances you would be protected by FSCS if the firm failed.”
Asking what if a relevant ETF provider failed useful too.


OEICS are covered upto £85k
ETFs are covered €20k Irish Domiciled
So spread your cash or ensure you buy Liquid ETFs from the Main players from what I understand

Thanks @nedjohn for the reply, that’s very interesting.

My plan is to spread my investments over different platforms, but knowing that the ETF’s themselves are subject to their own considerations when it comes to FSCS is very good to know.

Does the compensation scheme cover the profits too, for example…if I were to have £40k invested in Vanguard S&P500 for 10 years and it was now worth £80k, then for some reason the platform folded and lost our money and FSCS stepped in… Would the full 80k be covered or only the original 40k contribution?

If profits are also included in the protection then it would be wise to only utilise 40%-50% of the allocation on each platform to give it room to grow. Then do the same over multiple platforms spreading the risk. Furthermore, across those platforms choose different ETF providers and stick with the larger brands such as Blackrock/Vanguard etc…???

Nope,.£85k is the maximum
€20k for Irish Domiciled ETFs Maximum

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If you read Monivator, they go into great depths explaining the nuances of investing

@mikea if you put your money in VUSA (Vanguard S&P ETF), from Gandalf’s point, you are covered to €20k by the Irish authorities. The FSCS does not cover the ETF, as it is Ireland-registered not UK-registered. (thank you @Gandalf, useful to know).

On the general point about FSCS coverage of investment returns: for example if you put money in a UK cash ISA and it earns interest, the total amount is covered, including the interest, up to £85k.

If you wanted full FSCS coverage of your S&P500 investment, you would have to put your money in a UK-domiciled Fund, something like the UBS S&P 500 Index Fund (ISIN GB00BMN91T34), but that is not an ETF so unavailable on the IE platform.
The alternative platform you bought it via would likely charge a fee to buy it, or an annual charge to hold it, or both. So there would be a cost to achieving FSCS coverage of that investment.


No worries…I did quite a bit of research into this and didn’t realise that Irish Domiciled ETFs were not covered for £85k…
However, I for one have faith in IE and I am happy to keep adding and allowing the funds to compound. I understand the obvious fear surrounding things going wrong. But IE do hold a great selection of ETFs from BlackRock and Vanguard… we’re talking Trillions in Assets, bare in mind the UK stock market has a smaller market cap than Apple…
If Vanguard or Black rock went bust,.then the whole US stock market goes bang with it.
I wonder how many investors realise that Investment Trusts such as Scottish Mortgage are not covered by the FSCA? All investments are a risk and that’s the gamble we take.

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@nedjohn @Gandalf This is all great information. It just shows that companies throwing around the whole FSCS protected is all just marketing and really you have to do your own due diligence. Which I guess we should be doing anyway but a lot of people don’t.

It really is a minefield, I mean if the funds were not domiciled in Ireland then these funds would be subject to US withholding tax of 15% right…I assume this is why they base them in Ireland to lower costs but then we of course lose that 85k protection.

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ETFs providers are required to isolate the investment assets from the operating business. So there would be assets to sell or transfer to cover investors if the provider goes under…just nothing from the FSCS.

Any whirlwind that takes Blackrock/Vanguard out probably would take a big bite out of many of those assets though. But that is market-risk which Compensation Schemes don’t cover.

Appreciating the risks, I too am content to invest via IE - generally using large, liquid ETFs that employ replication (so backed up with assets), against core indices.

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Yes, Ireland is a cushy tax-haven for US based ETFs. I personally prefer ETFs over OEICS/Unit Trusts anyday. At least you have a rough idea at what the price will be when executed, especially when selling. With Unit Trusts, some companies such as Legal & General take up to 4 days to execute and settle. So if you break even on a fund and want to get out like I did last year, the price that you (think) you sell at is not the actual price you sell at…I lost £500 because of this. Even though IE only execute once-daily after 2:30pm, I will take that anyday over a Unit Trust…
If you haven’t already, it’s worth reading articles by Monivator, where I learned a lot from for free.

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Run mainly by 2 people - The Investor (TI) and The Accumulator (TA).

Good articles, mostly concentrated on passive investing rather than active stock picking.

The blog is free but you can pay a membership fee in 2 levels which then gives you access to a whole slew of articles written especially for members (Mavens & Moguls).

I have learned lots reading this blog over the years - not just from the articles themselves but also from the comments - there are some very knowledgeable people reading and commenting.

Well worth a read anytime!


Excellent, I find it to be a very good resource and as you said, the comments are from very knowledgeable people. Highly recommended, the free version.