Government to cut protections for investors in EU-based funds

[mc2fool]

"Tens of thousands of investors who have ploughed more than £60bn into EU-based funds will not be covered by the compensation scheme post-Brexit in a serious blow to consumer protection.
:
... The government has now decided that investors in EU funds, such as Dublin-based Lindsell Train Global Equity and Polar Capital Global Technology, will not have recourse to the Financial Services Compensation Scheme (FSCS).
:
... From January, UK investors will have to apply to foreign compensation authorities to get their money back if a product blows up."

https://citywire.co.uk/funds-insider/news/government-to-cut-protections-for-investors-in-eu-based-funds/a1431109

The article doesn't state if this also applies to Dublin domiciled ETFs but I'd have thought so. Can't say it particularly worries me in respect of my Irish domiciled Lindsell Train, Vanguard, iShares & SPDR holdings, but I guess it is something to at least be aware of .....

[dspp]

"Tens of thousands of investors who have ploughed more than £60bn into EU-based funds will not be covered by the compensation scheme post-Brexit in a serious blow to consumer protection.
:
... The government has now decided that investors in EU funds, such as Dublin-based Lindsell Train Global Equity and Polar Capital Global Technology, will not have recourse to the Financial Services Compensation Scheme (FSCS).
:
... From January, UK investors will have to apply to foreign compensation authorities to get their money back if a product blows up."

https://citywire.co.uk/funds-insider/news/government-to-cut-protections-for-investors-in-eu-based-funds/a1431109

The article doesn't state if this also applies to Dublin domiciled ETFs but I'd have thought so. Can't say it particularly worries me in respect of my Irish domiciled Lindsell Train, Vanguard, iShares & SPDR holdings, but I guess it is something to at least be aware of .....

It would appear to be the gloves coming off in the UK <> EU spate which is also a City Of London vs All Comers spate, courtesy of Brexit.

I wonder how much small print I need to wade through to figure out whether Vanguard funds based in Dublin such as VUKE, VERX, VWRL VAPX are affected.

regards, dspp

[Lootman]

Tens of thousands of investors who have ploughed more than £60bn into EU-based funds will not be covered by the compensation scheme post-Brexit in a serious blow to consumer protection.
The article doesn't state if this also applies to Dublin domiciled ETFs but I'd have thought so.

I wonder how much small print I need to wade through to figure out whether Vanguard funds based in Dublin such as VUKE, VERX, VWRL VAPX are affected.

What might save the Dublin-listed ETFs is that they trade on the LSE just like UK-listed shares. If that saves them then it should also save investment trusts that are listed on the LSE but domiciled elsewhere.

But I do not know yet.

[dealtn]

So presumably the current arrangement is for non-UK EU holders of UK funds to be covered by the UK compensation scheme? They too will no longer be covered going forward.

[FooledFrog]

I did ask on the Monevator blog.
In fact foreign domiciled funds never fell under the FSCS in the first place.
I should have done my research more seriously before buying in all these Ireland-based vanguard etfs.

[Lootman]

I did ask on the Monevator blog.

In fact foreign domiciled funds never fell under the FSCS in the first place.

I should have done my research more seriously before buying in all these Ireland-based vanguard etfs.

I feel safer with a Dublin-domiciled fund from Vanguard than a UK fund from just about any provider.

[FooledFrog]

I am thinking of switching to GB-based vanguard funds

[mc2fool]

In fact foreign domiciled funds never fell under the FSCS in the first place.

So are you saying that the CityWire article is just plain wrong?

"The government has now decided that investors in EU funds, such as Dublin-based Lindsell Train Global Equity and Polar Capital Global Technology, will not have recourse to the Financial Services Compensation Scheme (FSCS).

Currently investors in these funds are protected by EU compensation schemes as well as certain FSCS protections. The latter depends on a number of factors, including the type of firm or fund, the location of operations and the type of claim. From January, UK investors will have to apply to foreign compensation authorities to get their money back if a product blows up."

[FooledFrog]

Well as you can guess, i am no expert.

This postcast adresses the issue from 26 min and would confirm the article
https://moneytothemasses.com/news/podca ... -353308121

I trust the monevator blog more:
https://monevator.com/investor-compensation-scheme/ (article from 2013 but still relevant according to monevator)

I have had another look at the FCA website and it is quite difficult to use
https://register.fca.org.uk/s/
one cannot do an ISIN number search unfortunately, you have to search the fund by name
"Lindsell Train Global Funds" Reference 187658 is just "recognized" not "authorized" (according to monevator, only the "authorized" status would allow for compensation to apply)

on the FCA page:
"Consumers considering investing in a recognised scheme may wish to ask for further information from its operator about complaints and compensation arrangements. This is because the position may differ compared to a UK authorised scheme. A UK address from which the operator may be contacted can be found in the scheme's prospectus or latest annual report."

no need to rush for the exit, we just need to keep this in mind?

[mc2fool]

Well as you can guess, i am no expert.

Me neither. But thanks for the links ... yes, contradictory and clear as mud!

A bit surprised at this from the monevator link: "Vanguard Irish domiciled funds and ETFs are not covered by the Irish compensation scheme. The same is also true of State Street’s Irish domiciled SPDR ETFs, and iShares’ and I suspect of most other providers, too." So, not covered by any scheme at all then ...

no need to rush for the exit, we just need to keep this in mind?

Yes, as I said in my OP, it (even no cover at all) doesn't particularly worry me for my Irish domiciled Lindsell Train, Vanguard, iShares & SPDR holdings, but I guess it is something to at least be aware of.

I guess my biggest surprise is that none of the august body of posters here has spotted and raised it before ... or maybe someone did and I overlooked it ....

[Lootman]

it (even no cover at all) doesn't particularly worry me for my Irish domiciled Lindsell Train, Vanguard, iShares & SPDR holdings

Me neither. If Vanguard, Blackrock and State Street bank all fail at the same time, we will have more serious things to worry about.

[1nvest]

Offshore/non-UK-reporting funds incur income tax liabilities on capital gains, relative to original purchase date. Even if a fund lapses for a second, if at any time deemed non reporting then the entire holding period is flipped over to income tax basis for investors.

Seems like a easy target as part of Covid recovery i.e. all UK investors holding existing Ireland based ETF's. Would also have the added benefit of helping to repatriate into (prop up the) Pound.

Perhaps a action investors should be taking prior to year end.