12.7. We may hold client money in a client bank account located in a jurisdiction outside the UK. The legal and regulatory regime applying to any such bank will be different from that of the UK and in the event of the insolvency or any other equivalent failure of that bank, your money may be treated differently from the treatment which would apply if the money was held with a bank in the UK.
212 may hold funds in a non UK bank account which may not be subject to the same regulatory rules as if it were in a UK bank account. (* the bank may be subject to different rules, not 212) (this is the same for Freetrade fyi)
13.5. Investments purchased by us on your behalf or transferred to us will be registered in the name of a nominee company or our name or a sub-custodian. We will be responsible and liable for our nominee to the same extent as for our own acts, including losses arising from fraud, wilful default or negligence.
13.9. You agree that because of the nature of applicable laws or market practices in certain overseas jurisdictions, we may decide that it is in your best interest for your Investments held with us to be registered or recorded in our name or in the name of the person who is a custodian for the purposes of the FCA Rules, and if it is not feasible for us to do this, then:
- your Investments may be registered or recorded in the name of the firm or custodian as the case may be;
- your Investments may not be segregated and separately identifiable from the Investments of the firm or custodian in whose name your investments are registered; and
- as a consequence, in the event of a failure, your Investments may not be as well protected from claims made on behalf of our general creditors. You should note that when we arrange for a third-party to hold your Investments overseas there may be different settlement, legal and regulatory requirements than those applied in the UK.
Highlight mine. They specifically state that they may hold your assets directly in their own name rather than a nominee account.
They only replied initially to my concern about funds saying that 100% of client money is held in the UK. When i showed them their own terms they changed their response to say that this (both holding money aboard, and their terms around holding assets in their own name rather than a nominee) is to allow them āflexibilityā in case of emergency to take urgent action and to keep their business model sustainable.
In contrast Freetrade say the following
In regards to investments
When you invest with Freetrade, any UK-listed stocks or ETFs that you buy are held in your name by Freetrade Nominees Limited, which holds stocks and ETFs , with you as the beneficial owner.
legal:
We use third-party Custodians to hold our clientsā funds (including your Available Funds) and Securities for them. In the case of Securities purchased by you through our Services, we may use our own nominee company, Freetrade Nominees Limited, which is also a Custodian. We will require those Custodians to hold your Available Funds and Securities in accordance with the rules of the Financial Conduct Authority in the United Kingdom, including that all cash should be held in a segregated and designated client money bank account (to be clear, you will not have your own account with our Custodian, there could be a single account in which all of our customersā funds, including yours, will be deposited).
In regards to funds, or more specifically location of where funds are held Freetrade are similar in that funds may be held aboard
While we will typically use Custodians that will hold our clientsā funds (including your Available Funds) and Securities in the United Kingdom, we may also, in our sole discretion and based on the Securities in which you make Instructions, appoint Custodians to hold funds and/or Securities abroad. We will use reasonable endeavours to ensure that the level of protection afforded by Custodians who hold funds and/or Securities abroad will be materially the same as the level of protection afforded by our Custodians who hold funds and/or Securities in the United Kingdom, however you should be aware that there may be differences.
As iāve said previously, I donāt believe thereās anything wrong with the terms, but people seem to be completely unaware of the terms of how their investments may be held. Depending on where funds may be held is potentially more of an issue if the bank goes bust. Different regulatory protections apply in different countries but I expect that the vast majority of people arenāt keeping significant cash in their accounts (i believe for example the maximum protected amount in Ireland is less than the UK).
Investments are another story because everyone assumes that their investments are held with a third party custodian unlinked from the main company and therefor protected but the 212 terms dont say that.
Interestingly 212s terms state that only investments held with a nominee company are held with you as beneficial owner. Whether this is just an oversight I dont know, id give them the benefit of the doubt and say it probably is. But the whole point of a nominee is to protect you from debts of the company.
13.6. Whenever your Investments are registered in the name of a Nominee company nominated by us, that Nominee will hold them on trust for you. This means that you are the beneficial owner of the Investments. Any Investments held by a Nominee will be held in an omnibus account.
Holding assets in their own name is my concern and i wasnāt happy with their response around it either, so for me personally while i may use them im unlikely to keep any large holding with them in the future.