Currency

[Anonymous]

Hi All,

Does anyone know what would happen to clients funds if a foreign exchange broker were to go bust!

As far as I am aware they are not regulated by any financial body and the majority of them seem to be Limited or PLC companys.

Maybe I’m being over cautious but what would happen to clients funds if they were in the brokers account when they went bust?

Ronnie

[katy]

I’ve also asked this on other forums and didn’t get an answer. This is why I never use them. I remember one did go bust a few years ago and this sort of trading is very volatile. There are a lot of new ones advertising now.

[Anonymous]

What happens is that the major creditor, the clearing bank seizes any funds they can get their hands on to cover themselves. Unless you’re very lucky it takes a lot of time to get your money back, which will have been severely diluted as the liquidators line their pockets.
Legally there is supposed to be such a thing as client segregation. My practical experience of holding funds with a financial entity that went bankrupt overnight, is that so called “segregation” in fact offers no protection.
I think it would suprise many people to know how vulnerable many financial institutions are from rogue accountants / traders. Look what happened at Barings, and more recently at the massive american institutions like Enron and Refco. Financial institutions implode on a regular basis and if you follow the financial press, you will know that a list of failed institutions would be endless.
However it’s not healthy to get paranoid -the best thing that you can do is divide your money between institutions, then if you are unlucky enough to have experience of such a bankruptcy, they will not take you for everything you’ve got.

[katy]

Exactly my thoughts, it will happen one day and I don’t want to be caught. 8000 euros is better in the hand than 8750 with the creditors!!

[Anonymous]

Thanks for your replies Katy and Forestfire.

I wonder how many people just assume that when dealing with currency brokers you are covered by some regulatory body. I just assumed they would be regulated by the FSA. The problem is that you don’t really have any other option when transferring large sums, I had heard that you could take a UK sterling cheque to your bank in Spain and they would convert it into euros at the interbank rate but have not tried it!!

Ronnie

[Anonymous]

Hello Ronnie,
Just thought I should make it clear that my post was about financial institutions that ARE regulated by the FSA.

I think that it is logical to assume that as the financial industry in Spain is far less evolved than it is in the UK, therfore consumer safeguards and protection will be of a significantly lower standard over here.

Cheers
Forest

[Anonymous]

I have just returned from a money transfer trip to Spain, we set up accounts with several of the big transfer companies and where offered rates but being cautious we at the last minute decided to ask our Bank (Caixa) for a quote too, surprisingly they offered to do the transaction for an exchange rate of only 0.2% worse than the best offer from the agents. For peace of mind we went with the bank and the funds arrived in my UK bank at the agreed price within 48 hours.
Maybe we where just unlucky with the brokers but I was always under the impression that they offered a good deal, obviously not always the case 😕

[Anonymous]

Hi All,

Thanks for the different views, I emailed the currency broker I have an account with over a week ago asking what provisions they had in place to safeguard my funds and they have not had the decency to acknowledge my email.

I will definetly be looking at alternative ways to move my money in future.

Regards

Ronnie

[Anonymous]

Hi Ronnie,

Please let me know by PM the name of the currency broker you used. I like to track these things.

Mark

[Author]

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