The default declaration by the FSCS comes after both firms were placed into insolvency following an urgent application by the Financial Conduct Authority on 1 March.
Around 100 staff are employed by the two Beaufort firms, which operate from a main office London, with regional offices in Bristol and Colwyn Bay.
Approximately 14,000 Beaufort clients have invested in products such as ISAs and pensions. Customer entitlements include around £37m (€42m, $52m) of client money and £664m in client assets.
Administrators take-over
The FSCS is working with PwC, which has been appointed joint administrators of Beaufort Securities and special administrators of Beaufort Asset Clearing Services.
“The FCA also considers it necessary for administrators to take over the running of the Firms in order to protect assets from dissipation and protect UK consumers, including customers of both Firms, due to concerns that the Firms may be involved in financial crime,” PwC said in a statement.
Compensation claims
PwC said the main priority for the administrators is to identify, and in due course, return client money and assets to the rightful clients “to the fullest extent possible”.
“This process is likely to be subject to an initial delay while the administrators carry out a number of critical tasks in order to be able to make a full assessment of the situation.
“The administrators will be doing everything possible to expedite this process and minimise the hardship and inconvenience caused to clients,” PwC said.
One of the first things the administrators will be doing is determining an estimate of how much money can actually be recovered from the firm. This will be done through comparing the completeness of the segregated funds and assets with clients’ entitlements to form an early assessment of the indicative recovery available.
“The administrators expect to provide regular updates in the coming days on progress made but will be unable to address individual queries at this stage,” they said.
FBI delays
Controversy has surrounded the insolvency, as FCA gave the FBI extra time to finish an undercover operation into Beaufort, despite strong indications it was insolvent and close to collapse.
The actions by the UK watchdog likely resulted in clients continuing to transact with Beaufort, putting their money and assets at risk.
