There is a great letter from a reader in this weeks Investors Chronicle on the subject of nominee accounts. Under the title “Broken Brokers”, Jonathan Crozier says he used to work for Pritchard Stockbrokers who are one the brokers that went bust covered in previous articles. He complains about the low level of compensation under the Financial Services Compensation Scheme (currently £50,000) which he says is a ludicrously low figure for Mr Average.
But this is the paragraph that made the most impact: “Ask any of Pritchard’s ex-client little old ladies what they think of nominee accounts and the FSCS. Find me one who does not now wish that they had never heard of nominee accounts. Indeed, if they had insisted on keeping their shareholdings in their own-name (certificated) form, they would have lost none of their capital in Pritchard’s administration – and would have saved themselves so much time, energy, stress and distress. Nearly four years after the event, I believe there are still ex-clients who have not recovered their money”.
This is why we need a better alternative to nominee accounts that is readily available and a good electronic form of holding shares to replace paper share certificates, as ShareSoc has been campaigning for (see http://www.sharesoc.org/shareholder-rights.html). Plus of course why ISAs and SIPPs should not require the use of nominee accounts.