In the UK the Financial Services Compensation Scheme backed by government protects savings in standard bank accounts up to £85,000 per bank. What effects might there be if a financial services company/stockbroker were to go into administration that organised a much larger portion of an individual's wealth, regardless of the fluctuations in the value of the stocks themselves? Are there any regulations of a similar nature in place, or historical precedent to which we can refer?

I have read the questions "What happens to your investment if the broker (which acts as a custodian) goes bankrupt?" and "Stability of a Broker: What if your broker goes bankrupt? Could you lose equity in your account?", but am asking here specifically about companies in the United Kingdom.

  • Re: "Go into administration" ... Is this different from bankruptcy in concept, or just the way of referring to it over there? Commented Feb 26, 2014 at 13:02
  • Hi Chris, thanks for the response. I think we are looking at a difference in the usage of the terms between the UK and the US here, but for the purposes of my question, I mean either of the above/insolvency/administration/bankruptcy/financial difficulties in general. Commented Feb 26, 2014 at 14:31

2 Answers 2


Although I posted this question more than a year ago, I subsequently read information which may be of use as an answer, specifically regarding Pritchard Stockbrokers in the UK several years ago, in which the FSCS stepped in to compensate investors, as detailed in the following:



For reference, in case the links above are at some point in future taken offline, the FSCS FAQ states:

Q: I had “deposited” money with Pritchard so can I expect £85,000 compensation from FSCS?

A: No. Pritchard was not a deposit-taker so the money held does not qualify under regulatory rules as a deposit. The money will be treated as an investment, which carries maximum FSCS compensation of £50,000 per person. FSCS has no discretion to pay any more.

Q: What happens if my losses are over the FSCS maximum of £50,000 and I accept the FSCS’s compensation?

A: If you choose to accept compensation from FSCS, you will be required to assign (or legally transfer) to FSCS all of your rights to claim in the Administration. FSCS will then claim in the Administration standing “in your shoes” and will claim for the whole of your loss, even if it was over £50,000. When FSCS receives the dividends in your place it will then pay to you any amounts recovered to ensure that you do not suffer a disadvantage for having accepted FSCS compensation first.

Example 1:

Loss = £80,000

FSCS compensation = £50,000

Dividend of 50p/£ received by FSCS = £40,000

FSCS pays £30,000 to claimant so he is fully compensated (total £80,000), and retains £10,000 recovery for itself

Example 2:

Loss = £100,000

FSCS compensation = £50,000

Dividend of 50p/£ received by FSCS = £50,000

FSCS pays £50,000 to claimant so he is fully compensated (total £100,000), and retains nothing for itself

FSCS does not have to have make a full recovery of its £50,000 before it starts paying its dividend recovery on to claimants.

Claimants are not compelled to claim from FSCS, or to accept the FSCS offer of compensation. If a person does not want to transfer his legal rights to claim in the Administration to FSCS in return for accepting the payment of compensation, then s/he can decline our compensation and continue his claim in the Administration. After s/he has received the dividend(s), s/he can then return to FSCS to claim for any remaining shortfall.

Therefore, the answer provided by @DumbCoder was correct, but in circumstances where fraudulent activity would mean otherwise, the FSCS was willing to intervene on the behalf of investors.

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