Hoping someone can put my mind at ease with what will happen if in the unlikely circumstance Invest Engine goes bankrupt?
I know £85,000 is protected by the FSCS, but from what I gather that only applies to cash held in your account, not invested in an ETF.
I believe the ETF’s are held in your name in a client bank account so even if Invest Engine did go bust you are still the owner of your ETF’s.
My question is what happens then? If my ETF’s are in an ISA with Invest Engine, if they go bust are they still in an ISA? Or are they just ETF’s held outside an ISA, so now to transfer them into new ISA’s would you be restricted by the £20,000 per year limit?
Excellent question. Hoping for some detail in the answer.
Yes…I wondered too: how long before a provider that charges me nothing; and doesn’t add a bit to the spread; and hasn’t reported a profit yet, goes out of business holding our money.
Our holdings are ring-fenced in a separate CREST account, are not an asset of the Business and so can’t be used by a Receiver to pay off debts. The holdings can then be sold off or transferred as part of the winding up.
What happens if the spreadsheet showing who owns what in that CREST Account goes missing when the Receiver is called; or if someone in the Company siphons it? Then the FSCS can step in with 85k.
So there is an element of trust beyond 85k, or you could split your capital across multiple providers.
Oh, and I am sure IE has all the exits guarded, and this isn’t financial advice.
Assuming the spreadsheet is found, and nobody did a fast one, I’d think it likely the FSCS would encourage another ISA provider to take over the book, or if a receiver was looking to give you your money, you could reasonably ask that it is transferred to another provider. When IceSave went to the wall in 2008, the FSCS allowed ISA customers to transfer to another ISA provider.
Well you don’t fill me with the greatest confidence tbh, but I suppose what happened to IceSave might be the closest to an answer I’ll get if there isn’t a definitive standard procedure for these circumstances.
Worst case scenarios are always scary.
In investing, the main thing is to be aware of the risks we take, and diversify those we can and choose to.
My view: market economies can’t afford to let confidence go. It is why IceSave customers got all their money back, not just the £50k that was the limit at the time. I don’t stress it too much, but I do have a few ISAs.
@Omian Yes I’ve seen that thank you, but it doesn’t actually answer the question I asked at the end of my post.
First off, I feel I should just say we don’t foresee InvestEngine going bust; we have a longer term plan to grow the business etc. …but I complete get this thread is talking about worse case scenarios. So let me provide some more detail on the regulatory protections investors have in the UK, InvestEngine is regulated by the FCA.
Hopefully this will help answer some of the above Qs about spreadsheets & records.
CASS regulations & Audits – We’re regulated by the FCA and their Client Asset Sourcebook (CASS). I don’t want to get into the technical details here (they’re long & complex) but we have daily & monthly assets reconciliations (Cash and Stocks) processes. Both the internal & external reconciliation and overall robustness of these process are subject to FCA audits. There are InvestEngine senior individual who’s personally responsible for our CASS submission.
FCA financial solvency rules - the FCA has financial adequacy rules in place for businesses like ours, meaning we have to have a certain amount of capital I set aside to be allowed to trade. The FCA also has be happy with our financial plans/business model.
Independent Custody of Assets - Already mentioned in the thread
FSCS protection - Already mentioned in the thread
Hopefully this help answer some of the questions above. I see if we can put the above into a more detail FAQ with some more detail from our compliance team.
Thank you for your reply @tom.winterton I appreciate you taking the time to explain.
Yes the question was just a hypothetical worst case scenario, and I’m sure with the growing popularity of InvestEngine and with you adding other chargeable services like SIPP’s in the future you will be here for a long time to come.
However the question I asked was not directly answered in your post:
“If my ETF’s are in an ISA with Invest Engine, if they go bust are they still in an ISA? Or are they just ETF’s held outside an ISA, so now to transfer them into new ISA’s would you be restricted by the £20,000 per year limit?”
@BraveDave23 For me: In the unlikely event of IE going bust, the FSCS is obligated to fully compensate losses up to £85k.
If funds are moved out of an ISA wrapper, individuals suffer further loss through ongoing capital gains tax or tax on interest income. So, we would not have been fully compensated we would all complain.
It is a very specific, low-probability concern. Maybe give some thought whether you are keeping to your risk tolerance and whether self-directed investing is appropriate.
@tom.winterton thank you Tom…I am sure our records are more than adequate.
Hey @BraveDave23 thanks for clarifying. Your ISA allowance/wrapper is allocated to you, irrespective of the platform that holds it. This means if anything happens to InvestEngine, you will have the option to transfer your ETFs/ISA allowance to another provider. Similar to a normal ISA transfer, all the information held on your contributions will be transferred to your chosen provider, so your funds are ring-fenced by the contributions you made in previous tax years. It’s also worth noting, the FSCS protect ETFs and you can read more about this here- Search | FSCS