All is not well at Beaufort Securities. One of our members has asked that I run this Open Letter to Tanvier Malik. I’ve read it and strongly agree with the ‘Client A’, that it’ needs to be addressed as a matter of urgency! Mr Malik knows who ‘Client A’ is. I suggest you address the issues raised as a matter of urgency.
Open Letter to Tanvier Malik CEO Beaufort Securities CEO
This letter is written to you in an open format given Beaufort Securities’ position at the heart of the Retail investment community in the UK. I believe the issues detailed here are of wider public, and in fact, regulatory interest. I also postulate that if a large retail client with extensive experience of the regulatory framework can be subjected to the quite incredible course of events which I have been with your firm in recent months then it is even more important that a light is cast upon your actions by the appropriate authorities in assessing if there are failings in your procedures.
There are numerous points that I believe need publicising and addressing as detailed below –
The first point relates to KYC (“Know Your Customer”) whereby prior to transacting business for a private customer (professional or retail) that a fact find and suitability assessment is made where a client is deemed “advisory” or “discretionary”. The basis of my account with your firm was “advisory” and I was what is called a “retail” designated client.
During the period I operated my account with your firm (2016/17) I was offered placing positions in a number of companies & on the strength of representations to me by your staff members I participated in a number of these. Important perceived regulatory failing (1) – at no point until early July 2017 had a “fact find” been carried out on me by Beaufort. Indeed, when this fact find was carried out over 12 months after my account had been opened it became apparent that it should have been done right at the inception of the account and that the “advice” given would have been different.
The FCA’s guidebook is specific in this regard re COB 5.2.3 – “When a firm provides limited advice on investments to a private customer, the firm should not treat any resulting transaction as an execution-only one.”
Further, COB 5.2.4 states – “Principle 9 (Customers: relationships of trust) requires a firm to take reasonable care to ensure the suitability of its advice and discretionary decisions. To comply with this, a firm should obtain sufficient information about its private customer to enable it to meet its responsibility to give suitable advice”
I wonder how many other clients have not had the KYC requirements applied to them and by extension are in investments that may not be suitable for them?
The second point relates to the FCA’s definition of “Best Execution” – the guidelines are extensive here and I will stop short of quoting the rule book at you but my own understanding having worked as a dealer and being a CF30 is that “timely” execution is a key component of this. Numerous transactions were executed way beyond the usual couple of minutes that one would expect. In one instance I believe approaching 30 mins. I make the point that at the time of instruction and final execution that there were no “fast markets” or other similar issues in play that could be used as an excuse for such a delay. In a few moments a price can move materially, let alone a near 30 mins timescale. In this regard I believe that timely execution was not applied to my account and I wonder how many other Beaufort account holders are suffering same and being potentially detrimented.
Thirdly, there is a very serious issue that goes to the heart of both best execution again and, also the legal concept of “willing buyer, willing seller”.
I attempted to carry out a simple “broker to broker cross”. In effect the buyer was looking to confirm the trade through their underlying broker with you and the bargain be agreed with one side then reporting the bargain to the exchange. The order was given on an execution only basis by me. I have fact checked this with numerous market counterparts and 2 regulatory specialists and there was nothing out of the ordinary with regards to this structure. Indeed, broker to broker crosses effected both at prices that relate to current market spreads and that are different to market spreads transact many, many times a day.
Your firm was insistent that this trade be actually put through a market maker and so it was no longer a standard broker to broker cross despite both my and the counterparts insistence and protestations that we did not want it going through the market. In effect, your firm and the market maker attempted to frustrate an open market, arms length bargain between 2 wiling parties and dictate a new price – one that would have cost me personally £50,000. In illustrating just how wrong Beaufort Securities were in this regard, when I finally transferred my account elsewhere (despite obstacles being continuously put in my way in trying to effect this move I also add), the transaction was concluded immediately at the agreed prices between myself and the counterpart. This issue forms the main body of my FCA submission as if your approach was correct then by extension hundreds of other trades carried out daily are remiss in regulation or, in the alternate, your firm was wrong in this approach and it needs to stop before other clients are potentially (or have been) financially detrimented.
To conclude, I have made my own direct representation to the relevant dept at the FCA re the primary points detailed here and I urge you now, as a fellow market participant, to take a root and branch approach to your current systems and controls structure and, perhaps more importantly, your corporate culture. There is a saying that “the tone of any organisation comes from the top” and I ask you to reflect upon that. The stress I have been subjected to in dealing with these issues with your company this last few weeks has been phenomenal and I would not like any other investor to have to endure what I have, hence my bringing this to a wider market attention.