Question
I've been a regular investor using Halifax Sharebuilder ( because it's £1.50 per trade ) and so hold shares in their Halifax Share Dealing Nominee account. From your excellent website I recently found out that I am merely the beneficial owner of the shares, and 'Halifax' is the legal owner of them.
That prompted me to find out what happens if the organisations, that I have nominee accounts with, suffer financial problems and have received satisfactory ( or excellent! ) replies from them all - except Halifax who keep telling me that the compensation limit is £50k.
Can you get a better answer out of them - or is it actually unsafe to hold more than £50k with them? ( it would seem odd to advertise cheap dealing rates if there was any sort of chance that you could lose your holding totally, so I'm expecting a sensible answer to come forth eventually, but this 'ordinary consumer' has failed to get it so far )
PS. Their standard reply begins with "As a subsidiary of Lloyds Banking Group we are a part of the UK's biggest savings and mortgage provider which has a strong capital base and as such you can be confident that you are dealing with a sound business." which is enough to scare anyone!Answer
Stock broker nominee accounts all operate in a similar way. The shares will be registered in their name (well, technically the nominee account's name), but held for your benefit via the nominee account.
This means your name won't appear on the shareholder register and you won't usually be eligible to either vote or receive any shareholder 'perks' (less common these days anyway). But you should still expect your money to be safe (ignoring the risks of the underlying shares themselves).
Nominee accounts should always be ring-fenced from a stockbroker's own business. This means that if the broker goes bust the nominee account is unaffected. It might take a while to get the shares re-registered into your name (or another stockbroker's nominee account), but the important point is that your shares are safe.
However, there's a risk the stockbroker might dip their hands (illegally) into the nominee account (think Robert Maxwell and pensions...). While this is highly unlikely, especially for a large well established broker, I guess we can never say never.
If this does happen and the stockbroker goes bust (meaning they can't afford to reimburse the nominee account) then the Financial Services Compensation Scheme (FSCS) should kick in, but this only provides compensation for up to £50,000 of investments held per firm.
Bottom line, if you hold shares via a nominee account and don't trust your stockbroker not to illegally take your money, then limit your holding to £50,000.
A more secure way of holding shares is to use a Crest 'Personal Account', which allows electronic share trading but ensures you are the registered owner of the shares. The downside is that few stockbrokers currently offer this facility and it seems to be more expensive than conventional nominee accounts.
Halifax certainly haven't been very helpful in their answer to you. But I've checked and they operate a standard nominee account (Halifax Nominees Limited) as outlined above.
I've been a regular investor using Halifax Sharebuilder ( because it's £1.50 per trade ) and so hold shares in their Halifax Share Dealing Nominee account. From your excellent website I recently found out that I am merely the beneficial owner of the shares, and 'Halifax' is the legal owner of them.
That prompted me to find out what happens if the organisations, that I have nominee accounts with, suffer financial problems and have received satisfactory ( or excellent! ) replies from them all - except Halifax who keep telling me that the compensation limit is £50k.
Can you get a better answer out of them - or is it actually unsafe to hold more than £50k with them? ( it would seem odd to advertise cheap dealing rates if there was any sort of chance that you could lose your holding totally, so I'm expecting a sensible answer to come forth eventually, but this 'ordinary consumer' has failed to get it so far )
PS. Their standard reply begins with "As a subsidiary of Lloyds Banking Group we are a part of the UK's biggest savings and mortgage provider which has a strong capital base and as such you can be confident that you are dealing with a sound business." which is enough to scare anyone!Answer
Stock broker nominee accounts all operate in a similar way. The shares will be registered in their name (well, technically the nominee account's name), but held for your benefit via the nominee account.
This means your name won't appear on the shareholder register and you won't usually be eligible to either vote or receive any shareholder 'perks' (less common these days anyway). But you should still expect your money to be safe (ignoring the risks of the underlying shares themselves).
Nominee accounts should always be ring-fenced from a stockbroker's own business. This means that if the broker goes bust the nominee account is unaffected. It might take a while to get the shares re-registered into your name (or another stockbroker's nominee account), but the important point is that your shares are safe.
However, there's a risk the stockbroker might dip their hands (illegally) into the nominee account (think Robert Maxwell and pensions...). While this is highly unlikely, especially for a large well established broker, I guess we can never say never.
If this does happen and the stockbroker goes bust (meaning they can't afford to reimburse the nominee account) then the Financial Services Compensation Scheme (FSCS) should kick in, but this only provides compensation for up to £50,000 of investments held per firm.
Bottom line, if you hold shares via a nominee account and don't trust your stockbroker not to illegally take your money, then limit your holding to £50,000.
A more secure way of holding shares is to use a Crest 'Personal Account', which allows electronic share trading but ensures you are the registered owner of the shares. The downside is that few stockbrokers currently offer this facility and it seems to be more expensive than conventional nominee accounts.
Halifax certainly haven't been very helpful in their answer to you. But I've checked and they operate a standard nominee account (Halifax Nominees Limited) as outlined above.
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