Asked by: Lord Lee of Trafford (Liberal Democrat - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government, further to the Written Answer by Lord Bates on 8 May (HL7245), what restrictions are placed on the level of costs for administrators operating under the Investment Bank Special Administration Rules; and where responsibility lies for monitoring such costs.
Answered by Lord Bates
The investment bank special administration regime (SAR) applies to a broad range of businesses which are authorised by the FCA to hold client assets. The SAR aims to reduce the impact of an investment firm insolvency, and has a statutory objective to return client assets as soon as is reasonably practicable.
The SAR rules set out that client assets may be used to pay expenses which the administrator has properly incurred in ensuring client assets are returned. Under the rules, the administrator prepares a distribution plan which sets out how client assets will be returned, and how the administrator proposes the expenses of the special administration are to be allocated between clients. This plan must be approved by the creditors’ committee and then by the Court. The administrator is also required to produce progress reports on the administration. Under the SAR, relevant parties have the right to make an application to the Court if they consider that the administrator’s remuneration is excessive.
Individual Savings Accounts (ISA) are tax-advantaged personal savings accounts. Where a firm managing an ISA becomes insolvent, cash or stocks and shares ISAs are treated like any other client assets held by the firm. The treatment of self-invested personal pensions (SIPPs) in insolvency depends on how the SIPPs are held at the particular firm and what services that firm provides in relation to the SIPP. If the SIPP assets are held by the investment firm as custody assets, then the costs of their distribution may also be deducted from these assets in the special administration.
In the event of insolvency, and depending on the circumstances and eligibility, compensation under the Financial Services Compensation Scheme (FSCS) may be available for ISA and SIPP investments up to the relevant limit. ISA rules allow for any compensation to be reinvested outside annual ISA limits in order to protect the saver’s tax advantages.
Asked by: Lord Lee of Trafford (Liberal Democrat - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government, further to the Written Answer by Lord Bates on 8 May (HL7245), what advice they give to stockbrokers and fund managers to ensure that client's assets are fully protected from Investment Bank Special Administration Rules and their related costs.
Answered by Lord Bates
The investment bank special administration regime (SAR) applies to a broad range of businesses which are authorised by the FCA to hold client assets. The SAR aims to reduce the impact of an investment firm insolvency, and has a statutory objective to return client assets as soon as is reasonably practicable.
The SAR rules set out that client assets may be used to pay expenses which the administrator has properly incurred in ensuring client assets are returned. Under the rules, the administrator prepares a distribution plan which sets out how client assets will be returned, and how the administrator proposes the expenses of the special administration are to be allocated between clients. This plan must be approved by the creditors’ committee and then by the Court. The administrator is also required to produce progress reports on the administration. Under the SAR, relevant parties have the right to make an application to the Court if they consider that the administrator’s remuneration is excessive.
Individual Savings Accounts (ISA) are tax-advantaged personal savings accounts. Where a firm managing an ISA becomes insolvent, cash or stocks and shares ISAs are treated like any other client assets held by the firm. The treatment of self-invested personal pensions (SIPPs) in insolvency depends on how the SIPPs are held at the particular firm and what services that firm provides in relation to the SIPP. If the SIPP assets are held by the investment firm as custody assets, then the costs of their distribution may also be deducted from these assets in the special administration.
In the event of insolvency, and depending on the circumstances and eligibility, compensation under the Financial Services Compensation Scheme (FSCS) may be available for ISA and SIPP investments up to the relevant limit. ISA rules allow for any compensation to be reinvested outside annual ISA limits in order to protect the saver’s tax advantages.
Asked by: Lord Lee of Trafford (Liberal Democrat - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what is the legal basis that allows administrators of failed stockbroking firms to levy charges on clients' assets held by those firms.
Answered by Lord Bates
The legal basis for the payment of administrators’ expenses from client assets is contained within rule 135 of the Investment Bank Special Administration Rules (England and Wales) 2011 (Statutory Instrument 2011/1301).
The Investment Bank Special Administration Rules apply to a broad range of businesses which hold client assets and are authorised to carry on a regulated activity which relates to the dealing, safeguarding or administration of investments as agent or principal, including stockbrokers.
Rule 135 sets out that client assets may be used only to pay the expenses which administrators have properly incurred as a result of the work undertaken to ensure that client assets are returned as quickly as possible. The rule also sets out the order of priority for payment of those expenses.
Asked by: Lord Lee of Trafford (Liberal Democrat - Life peer)
Question to the HM Treasury:
To ask Her Majesty’s Government, further to the answer by Baroness Neville-Rolfe on 23 March (HL Deb, col 267), why clubs, societies and charities are barred from owning premium bonds.
Answered by Baroness Neville-Rolfe - Shadow Minister (Treasury)
National Savings and Investment (NS&I) consider a prize as unclaimed when it has not been paid or cashed in to the bond holder within 18 months of the prize being issued. NS&I proactively encourage customers to find funds and accounts they have lost track of. They do this in a number of ways, including regular media campaigns and their continued support for the My Lost Account service.
Since the first prize draw in July 1957, 364 million prizes have been awarded with a total value of £17.2 billion. To date, there are 1,353,438 unclaimed Premium Bonds prizes worth a total of £55.2 million, just over 0.3% of total prizes awarded.
The legislation under which Premium Bonds are offered states that Premium Bonds can only be purchased or held by an individual.
Changing this legislation to allow charities, clubs and societies to purchase Premium Bonds would have significant operational implications for NS&I. It would require systems to be put in place to allow multiple authorised signatories to each account and ensure that any instructions received come from authorised individuals. This would result in a large operational cost relative to the likely scale of deposits, and would therefore not be cost-effective for the taxpayer.
Asked by: Lord Lee of Trafford (Liberal Democrat - Life peer)
Question to the HM Treasury:
To ask Her Majesty’s Government what is their latest calculation of the total value of unclaimed premium bond prizes.
Answered by Baroness Neville-Rolfe - Shadow Minister (Treasury)
National Savings and Investment (NS&I) consider a prize as unclaimed when it has not been paid or cashed in to the bond holder within 18 months of the prize being issued. NS&I proactively encourage customers to find funds and accounts they have lost track of. They do this in a number of ways, including regular media campaigns and their continued support for the My Lost Account service.
Since the first prize draw in July 1957, 364 million prizes have been awarded with a total value of £17.2 billion. To date, there are 1,353,438 unclaimed Premium Bonds prizes worth a total of £55.2 million, just over 0.3% of total prizes awarded.
The legislation under which Premium Bonds are offered states that Premium Bonds can only be purchased or held by an individual.
Changing this legislation to allow charities, clubs and societies to purchase Premium Bonds would have significant operational implications for NS&I. It would require systems to be put in place to allow multiple authorised signatories to each account and ensure that any instructions received come from authorised individuals. This would result in a large operational cost relative to the likely scale of deposits, and would therefore not be cost-effective for the taxpayer.