SVS Securities bites the dust as traders face lenghty freeze on withdrawals

Today, the grim reality of the demise of another stockbroking firm in the UK has come to pass.

SVS Securities, based in London, has gone to the wall, having gone into administration following a regulatory investigation.

Customers will now be unable to buy and sell shares or pull money out, until administrators Leonard Curtis have confirmed its books are in order and have stated that client money and shares will be returned to them, and will not be used to pay off any SVS debts.

Indeed, the benefit of being a retail investor with a bona fide firm in a major financial center such as London is that it is very rare for firms to simply close down and run away with client assets, however in this case, SVS Securities demise shows that funds and assets can be locked into accounts for some time before restitutions commence.

The Financial Conduct Authority (FCA) emphasised that, should customers suffer any shortfall due to wrongdoing or poor accounting at SVS, the Financial Services Compensation Scheme will cover losses up to £85,000.

Despite the veil of security which is very much a good thing in terms of UK rulings on client assets, customers of SVS Securities did demonstrate a degree of concern this morning via social media.

One customer who took to Twitter to voice his concerns, Adam Windust, said: ‘My shares are all in here. Cannot log in and no one is answering the phone!’

Another said: ‘I have an execution-only account there too. Won’t be trading those shares for a while.’

The demise of the brokerage occurred after the FCA ordered it to stop trading activities, and blocked it from selling its own assets or its clients.

The FCA has stated that it began the investigation as a result of some intelligence it received about the assets in which clients’ money was being invested.

It follows the collapse of broker Beaufort Securities last year after an FCA intervention, amid allegations of fraud. SVS Securities core business is the matching of retail investors with firms on London’s Alternative Investment Market, as well as FX trading.

It is the highbrow reputation of stockbrokers and long established traditional investment and hedge fund providers that provide a sense of security to investors, a dynamic that has been replicated recently in the overzealous treatment by European regulators of FX brokers and laisse faire treatment of stockbrokers and hedge funds.

Earlier this week, FinanceFeeds highlighted the somewhat hypocritical stance of some authorities, especially when bearing in mind the old boys club-style pandering to Woodford Investment Management, one of the largest hedge funds in the UK, despite the damage done to clients and even massive to retail financial services giants such as Hargreaves Lansdown has not been taken so seriously as leverage restrictions on regulated brokerages who have never given their customers cause to complain.

Yes of course, we advocate the censuring of those who do wrong, and laud the abilities of good quality regulators which genuinely understand our industry such as Australia’s ASIC which has acted quickly toward firms that do wrong, and yet has paved the way forward for a good quality retail FX environment, however there has been a definitive burden on the retail FX firms with clean copybooks.

In essence, we can see that hedge funds and securities firms – in this case SVS counts as an FX brokerage as it did offer FX as a main business activity – to the same standard as regulated OTC derivatives companies.

FinanceFeeds spoke about this matter today with a hedge fund manager in Australia, who also creates automated algorithmic trading systems for professional traders.

He said “How do you think Tier 1 banks that provide OTC FX liquidity [and there are not a lot of them] will react to FX margin brokers chasing Hedge Funds, trading houses as counterparties?”

“I think hedge funds will game the broker because the brokers LP comes from a small number of banks. If a retail broker wants to keep hedge funds, then it must take the volume trades and probably run higher concentrated risk and NOP to natural hedge percentage. I think FX margin brokers are heading into a playing space that are not equiped for so therefore it is better to play in the sandpit of high net worth retail clients for the time being.”