In recent days, a few people have noted that UK broker Selftrade has stopped opening new client accounts. The text on the account page has been reading “We are undertaking a review to enhance some of our processes, so we are unable to progress your application at this time”, which could mean anything.
Today, an article on Money Marketing sheds a little bit more light:
Execution-only platform Selftrade has stopped taking on new customers with the platform voluntarily varying its permissions following discussions with the FSA.
Exactly what’s going on is still not clear, but the involvement of the regulator will not reassure some users. For obvious reasons then, Selftrade is at pains to stress that whatever it is has not involved any losses to clients or the firm:
In order to devote the resource required to this review, Selftrade is temporarily suspending the acquisition of any new customers. Existing customers are unaffected by the VVOP and can continue to place new business with the firm. Selftrade is looking to enhance its processes and wishes to stress that no client money has been lost nor has there been any financial loss to the firm resulting from its previous processes.
I have absolutely no additional insight into what’s involved. To reassure those who are are thinking about the worst case scenario, despite Selftrade’s comments, it’s worth reviewing the Financial Services Compensation Scheme and how it affects UK brokers (basically, up to £50,000 worth of losses per person per firm for investments).
In addition, Selftrade is owned by French financial services group Boursorama, which is controlled by Société Générale, so it has significant backing. There is generally no explicit obligation for a parent to support its subsidiary, but for obvious reputational and regulatory reasons large firms would usually try to do so, if it were ever necessary.
It’s also worth pointing out that while most investors will immediately think of issues involving the safety of their investments, such as failure to segregate client assets fully – something that happens intermittently even at major firms (Barclays, BlackRock, Transact) – “processes” can involve many other topics. These range from the strength of money laundering countermeasures to the reliability of IT systems (Selftrade’s recent overhaul of its site has not met with universal user approval). Anybody who has worked inside a UK financial services firm recently will know that the amount of processes required to comply with regulation is immense.
Nevertheless, hopefully the details will be cleared up soon, because this is obviously not helpful to Selftrade’s image among either existing or new clients.