Question
Crown Currency, the foreign exchange company, has gone bust seemingly taking customer's money with it thanks to inadequate regulation. Some reports also suggest they were defrauding their customers.
Now there is one company called Baydonhillfx who is listed on the London stock Exchange.They are not FSA regulated but are regulated by the LSE.
Are customers any safer in doing currency transactions with this company?Answer
Based on newspaper reports Crown Currency apparently suffered from the downturn in travel then started offering unprofitable exchange rates simply to attract cash flow and keep the wolves from the door. The business sadly, and somewhat inevitably, collapsed, potentially leaving thousands of customers out of pocket.
What's galling for customers is that the Financial Services Authority (FSA) logo was displayed on Crown Currency's website as it was 'registered' with the FSA. I think it's fair to say that most people would see a FSA logo and assume their money would be safe, with compensation payable if the company went bust. Unfortunately, they couldn't be more wrong.
Under the Payment Services Directive, effective from 1 November 2009, any business providing payment services (which includes foreign exchange brokers) must be authorised by or registered with the FSA.
Companies with payments averaging less than €3 million per month must be registered, otherwise they must be authorised (more complex and expensive than being registered). New brokers must be registered or authorised before they start trading, but those who were proving foreign exchange services on 25 December 2007 have until 25 December 2010 to become registered or 1 May 2011 to become authorised – as appropriate.
Of the two an authorised foreign exchange broker is far preferable, as they must, amongst other things, use safeguarded bank accounts when handling your money (so if they go bankrupt while exchanging your money you should be safe), hold a minimum amount of their capital in the business (reduces the risk of going bust), have a complaints procedure (allowing you to take your complaint to the Financial Ombudsman Scheme if not satisfactorily resolved) and demonstrate they’re fit and proper to run the business.
But, disappointingly, even if you use an FSA authorised firm your money is not covered by the Financial Services Compensation Scheme (FSCS). This is far from satisfactory and leaves customers vulnerable to foreign exchange brokers going bust. When using one I'd stick to authorised firms that have been around for a few years to minimise risk.
As for Baydonhillfx, they're neither registered nor authorised by the FSA as yet, although they do claim to 'follow all FSA guidelines', including the use of a separate client money account. The company is listed on AiM, but the criteria for this are far less rigorous than being listed on the main London Stock Market and pretty irrelevant as far as consumer protection goes. They may well be a reputable company, but I'd feel more comfortable using a broker authorised by the FSA. After all, if Baydonhillfx does follow FSA guidelines I can't see any reason for them not already being authorised...strange.
Crown Currency, the foreign exchange company, has gone bust seemingly taking customer's money with it thanks to inadequate regulation. Some reports also suggest they were defrauding their customers.
Now there is one company called Baydonhillfx who is listed on the London stock Exchange.They are not FSA regulated but are regulated by the LSE.
Are customers any safer in doing currency transactions with this company?Answer
Based on newspaper reports Crown Currency apparently suffered from the downturn in travel then started offering unprofitable exchange rates simply to attract cash flow and keep the wolves from the door. The business sadly, and somewhat inevitably, collapsed, potentially leaving thousands of customers out of pocket.
What's galling for customers is that the Financial Services Authority (FSA) logo was displayed on Crown Currency's website as it was 'registered' with the FSA. I think it's fair to say that most people would see a FSA logo and assume their money would be safe, with compensation payable if the company went bust. Unfortunately, they couldn't be more wrong.
Under the Payment Services Directive, effective from 1 November 2009, any business providing payment services (which includes foreign exchange brokers) must be authorised by or registered with the FSA.
Companies with payments averaging less than €3 million per month must be registered, otherwise they must be authorised (more complex and expensive than being registered). New brokers must be registered or authorised before they start trading, but those who were proving foreign exchange services on 25 December 2007 have until 25 December 2010 to become registered or 1 May 2011 to become authorised – as appropriate.
Of the two an authorised foreign exchange broker is far preferable, as they must, amongst other things, use safeguarded bank accounts when handling your money (so if they go bankrupt while exchanging your money you should be safe), hold a minimum amount of their capital in the business (reduces the risk of going bust), have a complaints procedure (allowing you to take your complaint to the Financial Ombudsman Scheme if not satisfactorily resolved) and demonstrate they’re fit and proper to run the business.
But, disappointingly, even if you use an FSA authorised firm your money is not covered by the Financial Services Compensation Scheme (FSCS). This is far from satisfactory and leaves customers vulnerable to foreign exchange brokers going bust. When using one I'd stick to authorised firms that have been around for a few years to minimise risk.
As for Baydonhillfx, they're neither registered nor authorised by the FSA as yet, although they do claim to 'follow all FSA guidelines', including the use of a separate client money account. The company is listed on AiM, but the criteria for this are far less rigorous than being listed on the main London Stock Market and pretty irrelevant as far as consumer protection goes. They may well be a reputable company, but I'd feel more comfortable using a broker authorised by the FSA. After all, if Baydonhillfx does follow FSA guidelines I can't see any reason for them not already being authorised...strange.
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