Broker's Client Accounts

[jonic]

Last post from me

The way client accounts are run changed BECAUSE OF THE PETERS CASE

DAKA you dont want to hear the good things do you.

The flip side

 

[Deleted User YDKXO]

Where are your examples to support your last statement?

Tarquin Boat Co
RYB Marine Sales
B A Peters (arguable)

I'm sure others could add to that list

Just think of all the people who have lost money in such areas as building work, home improvements etc. And when did car dealers offer you a contract that gave you beneficial ownership of a portion of your new car in return for your deposit? In all these cases you become an unsecured creditor who can lose your money if the trader becomes insolvent before he delivers the goods

.

If you're foolish enough to pay for building work up front then yes you are at risk. If you put a deposit on a car using a credit card, as most people do, you are protected by the card co. The point is that with boats you are dealing with a whole order of cost higher; many boats change hands for more than the value of the average UK house and yet sellers/buyers are willing to put their money in the hands of one horse companies that they barely know. Yes there are steps you can take to minimise that risk but the point is that most sellers/buyers are not savvy enough to understand the risk or do anything about it. Worse, the industry does nothing to make people aware of the risk

 

[jonic]

, the industry does nothing to make people aware of the risk

http://www.abya.co.uk/

 

[DAKA]

Last post from me

The way client accounts are run changed BECAUSE OF THE PETERS CASE

DAKA you dont want to hear the good things do you.

The flip side

You shouldnt take this personally.

I am happy that you are acting correctly.

I am happy to accept that YOU have done almost as much as possible to protect your clients money.

None of that stops another Yacht Broker from borrowing from the clients account does it !

Now what the forum need to ask themslves,

Is Pete on a wind up or does he know what he is talking about.........

Well Mike is also on similar lines and hasnt got a reputation for winding you up.........

Tranona / Jonic appears to disagree all round and is knowledgeable........, perhaps so but they cant be expected to be an expert in every legal matter and neither speak for the Brokers association.

ASk yourselves this.................

If the risk of a Yacht Broker legging it with your cash is so remote and unlikely why dont the Yacht Brokers association stand guarantor for the first £250 000 for their members , perhaps just the trusted ones with audited accounts, 5 years trading etc 'DAKA standard accredited'?

That would give them a huge advantage over their competitors, everyone would scramble to find a 'DAKA accredited 'Broker to sell/buy and value could be seen from selling through a broker.

 

[Crabman]

Like all things in life ,there are good and bad .Buying a yacht should be a good experience and exciting one. As discussed if you do not trust a broker ,simple dont deal with them. Put in place what you are happy with to hand over the cash. The thing I find sad is all the miss trust that is flying about .Its not good Karma. To say that all brokers are bad is not true ,you know it and I know it.

 

[Crabman]

Originally Posted by Deleted User
, the industry does nothing to make people aware of the risk

Exactly get off your arse and do your homework.Put in place what YOU are happy with. Dont wait for the bus to come along . THINK FOR YOURSELF. Its not rocket science.

 

[Deleted User YDKXO]

http://www.abya.co.uk/

Sorry but that does bugger all to warn customers of the risks associated with brokers fraudulent use of client a/c funds

 

[DAKA]

Sorry but that does bugger all to warn customers of the risks associated with brokers fraudulent use of client a/c funds

One of your posts questioned if anyone lost money when BA Peters went pop, its very sad to read and I really hate having to bring this up but this is real people, just like you and I who have lost serious money, I have included their names in order that Jonic and Tranona can attempt to make a connection, 3 months before BA Peter called in the administrators all the clients funds less £10k were used to offset the overdraft, if they hadnet stopped this practice which was set up by Barclays then £840 500 of clients funds would have been offset against the BA peters overdraft, as it happened the practice was stopped just in the nick of time but there were real casualties ........The Atkinsons had dealt with BAP as broker in selling their yacht and purchasing a Bavaria 34 yacht. The majority of the funds received from the sale of their yacht were paid into the current account, despite assurances to the contrary made by BAP staff. The Atkinsons also paid a further deposit towards the purchase of the Bavaria 34 but the yacht was not delivered.

The Clarkes entered an agreement to purchase a Bavaria 31 yacht and paid instalments of £28,532 towards the purchase price. Again they were assured that these sums would be paid into the client account, but in fact the money was paid into the current account and the Bavaria 31 was not delivered.


(quoted text, see here for full details)

The Law has not been altered in any way to make anyones money any safer .

Some Yacht Brokers associations have issued guidelines however you dont need to be part of a Yacht Brokers association and there isnt any system of compensation or punishment if a Yacht Broker doesnt bother to follow the guidelines.

 

[PaulGooch]

Like all things in life ,there are good and bad .Buying a yacht should be a good experience and exciting one. As discussed if you do not trust a broker ,simple dont deal with them. Put in place what you are happy with to hand over the cash. The thing I find sad is all the miss trust that is flying about .Its not good Karma. To say that all brokers are bad is not true ,you know it and I know it.

I missed the posts where it was said (or even implied) that all brokers are bad, could you please direct me to those posts ?

 

[Tranona]

Tarquin Boat Co
RYB Marine Sales
B A Peters (arguable)

I'm sure others could add to that list

I believe the first two concerned their activities as traders - that is buying and selling on their own account, although in the case of the first named there were also accusations of offences to do with mortgages on boats (as in the case of the second company). Unless you know differently there were not issues specifically related to taking money from client accounts. Happy to be corrected if I am wrong.

As you say Peters is "arguable" - as the failure of the company and the subsequent court case was not directly connected with brokerage activities, but with trading in new boats on their own account. The issue of client accounts came into it because they were using the account for both types of business. There was no suggestion that brokerage clients funds were not dealt with correctly. The malpractice was in relation to deposits and stage payments on new boats.

It is important that this distinction is made, otherwise as we see here the wrong target comes under attack. It is also important to understand that the term "client account" has no legal meaning. It is only shorthand to show that the account is separate from the trading account. What gives it specific properties is its purpose and method of operation. The test (which are summarised in the report of the Peters case) is whether a trust has been formed. It is the existence of the trust that means the funds clearly belong to the client and are held in trust by the broker under the terms of the trust. That is what makes it illegal for the broker to "dip into" the account for their own benefit. So, despite what Pete says, there is no need for legislation as it is already illegal.

Setting up an account in the way the ABYA recommend is effective in creating a trust. Having specific "legislation" will add absolutely nothing.

On the point of making people aware - if they follow the advice to check the nature of the broker's client account then buyers and sellers will know that they have the protection they need.

Just to add a couple of other points. The comparison with solicitors is a red herring. The "enjoy" their special status because (like accountants) only they can undertake certain types of work. In return for this "monopoly" there needs to be be some protection for the consumer as they have no choice but to use them - unlike brokers and other intermediaries which consumers may use through choice. Solicitors usually operate in partnerships which makes them all liable for actions of an individual partner, so that is the first line of protection. However partners sensibly take out insurance with the Law Society to protect themselves against such actions of individual partners. The nature of trust accounts where a solicitor is trustee is often very different from brokers trust accounts. The latter generally hold moneys for only very short periods before they have to account to clients - often only minutes for large transactions like final payments. In practical terms it is very difficult to take these funds and "hide" the fact.

If you look at frauds that have involved boating you will find that they are usually connected with complex transactions where the perpetrator is not continually held to account - the very opposite of brokerage transactions.

It is important to emphasise the issue of choice. There is no compulsion to use brokers. You use them if you believe it is in your best interest, so as an individual you have to take responsibility for your choice. The legal framework is there to protect you. It is not perfect in the sense that you cannot legislate against people committing crimes but you can say what is right or wrong and provide remedies when things go wrong.

The question here is whether the law is strong enough and the remedies effective. For all the huffing and puffing there is still no evidence that there is a failure of the law or the remedies.

 

[DAKA]

I missed the posts where it was said (or even implied) that ll brokers are bad, could you please direct me to those posts ?

BA Peters wernt bad Brokers either !

They were very good Brokers with an excellent reputation.

They were operating a clients account with Barclays.

Barclays had set up a facility where the clients account was swept of funds once a week (£10 k left in as a balance) , the swept funds were used to offset the massive over draught in the working business account .

It was normal practice, no one has been convicted of any offence.

Thankfully the normal practice was stopped just before they went bust or there could have been far more casualties.

 

[DAKA]

As you say Peters is "arguable" - as the failure of the company and the subsequent court case was not directly connected with brokerage activities, but with trading in new boats on their own account. The issue of client accounts came into it because they were using the account for both types of business. There was no suggestion that brokerage clients funds were not dealt with correctly. The malpractice was in relation to deposits and stage payments on new boats.

I recognise your theoretical argument but I still have difficulty in seeing a gap between the activities, practically speaking.
The Atkinsons had dealt with BAP as broker in selling their yacht and purchasing a Bavaria 34 yacht. The majority of the funds received from the sale of their yacht were paid into the current account, despite assurances to the contrary made by BAP staff. The Atkinsons also paid a further deposit towards the purchase of the Bavaria 34 but the yacht was not delivered.

The Clarkes entered an agreement to purchase a Bavaria 31 yacht and paid instalments of £28,532 towards the purchase price. Again they were assured that these sums would be paid into the client account, but in fact the money was paid into the current account and the Bavaria 31 was not delivered.


(quoted text, see here for full details)

 

[DAKA]

There was no suggestion that brokerage clients funds were not dealt with correctly.

It was documented that they were operating a clients account with Barclays.

Barclays had set up a facility where the clients account was swept of funds once a week (£10 k left in as a balance) , the swept funds were used to offset the massive over draught in the working business account .

It was normal practice,

And you call this operating a clients account correctly.............

I seriously hope you dont ever advise any yacht Brokers associations , solicitors, Insurance Brokers..........

Thats it for me, I am clearly wasting my time.
I hope the Yacht Brokers associations have a better understanding of their customer concerns.

 

[PaulGooch]

<snip>

On the point of making people aware - if they follow the advice to check the nature of the broker's client account then buyers and sellers will know that they have the protection they need.<snip>

What is this advice ? Where does one find such advise ?

My Aunty Mary doesn't read this forum and she knows nothing of the issues discussed here. How will she know about all the things she should do to safeguard her money ? When she hands over a chunk of her hard earned and long saved cash to a broker, how is she supposed to know that the broker can do what he likes with her money ? When he assures her that the money goes into a separate account, how does she know that the separate account is a correctly set up trust account ?

She doesn't. She's just an ordinary person who's managed to save up a few grand to pay the deposit and will fund the rest of the purchase with a bank loan. All the talk about what people should be checking and how they should be doing this, that and the other is a nonsense.

Once again, the key issues are being ignored by the same people. Membership of one of the brokers associations is voluntary, failure to follow their rules carries, at the worse, the threat of expulsion. The use of client accounts is voluntary. Using clients deposits for day to day trading is NOT against the law, unless you had the intention of stealing the money. Fraud is a very, very difficult thing to prove. If a broker used the deposits to keep his ailing business afloat, but then the business went bust, it would be impossible to prove that he had committed fraud and everyone would lose their money.

Much is repeatedly said about the brokers associations and how their rules protect all parties. Much is said about the use of correct;y set up client accounts. The answer seems really simple to me, require that all brokers (including dealers selling their own boats) be a member of one of the brokers associations and follow the rules they set out. Make it a legal requirement.

Simples. It costs nothing to the industry. It costs nothing to the buyers or sellers. All of the decent brokers (the vast majority, i'm sure), will be unaffected, as they are surely already members and follow the "rules".

It will NOT protect anyone from a determined thief or fraudster, not much will. What it WILL do, is to protect people from someone setting up as a broker and doing things incorrectly, causing people to lose money. It will protect against Peters type incidents. It will also give people a lot more confidence when dealing with brokers and can only help to improve the image of the industry.

Disclaimer : No brokers were harmed in the posting of this message. Full respect to the forums resident brokers, all of whom i'm genuinely positive operate in the most professional manner.

 

[Deleted User YDKXO]

I believe the first two concerned their activities as traders - that is buying and selling on their own account, although in the case of the first named there were also accusations of offences to do with mortgages on boats (as in the case of the second company). Unless you know differently there were not issues specifically related to taking money from client accounts. Happy to be corrected if I am wrong.

Frankly it doesn't matter. Certainly in the case of Tarquin, customers were given assurances that their money was being held securely and separately from the company's trading accounts although whether the word 'client account' was used in particular cases, I don't know. The fact is that customers trusted Tarquin to hold their money securely and they didn't.
I'm going to bow out of this thread now, as I think I did the last time we discussed this matter. I do believe that the vast majority of brokerage companies are honestly and properly run but I also believe that many of their customers are not aware of the possible risks of allowing brokerage companies to handle large amounts of their money. As a serial buyer and seller of used boats, I have my own views on this matter and I take my own precautions to minimise the risks of my transactions and nothing said on this thread will change that

 

[Tranona]

Thats it for me, I am clearly wasting my time.
I hope the Yacht Brokers associations have a better understanding of their customer concerns.

Once again, if you only concentrate on the bits that fit your argument you will get things wrong. All the brokeerage clients whose funds were paid into the client account got their money.

The failure in the case you describe is in NOT paying the funds into the client account. So your "law" would have to make lying illegal - and I thought it already was.

 

[Tranona]

What is this advice ? Where does one find such advise ?

On the YDSA site. It was extensively publicised at the time of the Peters judgement. It is alos well covered in the advice on buying and selling boats from the RYA.

As to whether there needs to be a law that forces the use of trust accounts, you still have to show that there is a need - that is there is an abuse that can be reduced or removed by a specific law. As I have said many times, there does not seem to be this evidence. There are many cases of fradulent activity, but they all break existing laws. Any new law would have to show that it does something that cannot be done within the existing laws as refined and clarified through case law - just as the Peters case clarified an aspect of trust law as applied in these specific circumstances.

Buyers and sellers need to take some responsibility for their own actions - they have a choice and when they have large sums of money at stake, surely it is incumbent on them to make themselves aware of the options available to them? and if they don't feel able to make the decision themselves seek advice.

The analogy with buying and selling houses is often used, and as Mike says, many boat transactions involve sums far greater than many house transactions. Would you buy a house without seeking advice on the risks involved? Of course not - why should you get involved in a boat transaction without taking similar precautions. Would you hand over money without being satisfied with the security you have been offered? The mechanisms are there to be used.

There are a number of inaccuracies in your post which suggests that you still do not understand the differences between traders and brokers. A trader who takes a deposit against goods to be delivered in the future can indeed use the money if it is paid into his trading account. A broker who pays the money correctly into a client trust account cannot. That is the whole point of this argument. There is a clear distinction in law between the two. Just read the Peters case and you will see how important it is.

The failures are clear - they are when buyers become unsecured creditors of companies that go bust - and this is unrelated to client accounts. It could be solved by making client accounts a legal requirement for all businesses taking deposits against the future supply of goods. This however would be a fundamental change to the structure of our trading laws and would make many consumer businesses impossible to run.

When you are dealing with individual transactions involving large sums such as boats there are many methods available to protect your money, as is often discussed here. However these are not costfree so many people choose not to use them and accept the risk of being an unsecured creditor.

 

[Nautical]

Clearly a hot topic !

As may have been inferred elsewhere, if you are about hand out significant sums of money on a purchase it is somewhat naive to think that everyone else has done everything in their power to protect your money. In 90% of cases most registered brokers will do and have unblemished records for many years, nevertheless we are talking about the trustworthiness of human beings and no matter how many checks and balances you put in place you can never legislate against a criminal act, if someone is determined to rip you off they will find a way.

Better to go armed with some common sense and a healthy dose of skepticism and do your own due diligence.

The easiest and most common sense way is to engage an independent third party as stakeholder and my preference despite the extra cost is to use an escrow lawyer. It would be almost impossible for any broker/seller to run off with your money, they don't get the money until you get your boat free of encumbrance etc, simple as that.

Buying a boat is expensive, I can say from having sold a lot, one does find certain buyers reluctant to spend anything above and beyond what they can get away with, they are about to part with say £300k yet will argue to hell and back not to spend £1500 on using escrow facilities, "£1500 will buy me a set of flashy LED lights for the saloon"..... go figure ???

If you are going to spend that sort of money, house, boat, light aircraft whatever, for goodness sake show some common sense, if you are nervous of a broker client account then don't use it, go see your lawyer and use escrow. If the broker doesn't like it and huffs and puffs then you know your nervousness was warranted, if he is straight he won't care as long as he gets the deal done.

 

[DAKA]

All the brokeerage clients whose funds were paid into the client account got their money.

The failure in the case you describe is in NOT paying the funds into the client account. So your "law" would have to make lying illegal - and I thought it already was.

Clients in the BA Peters case were recognised in court as being lied to by BA Peters staff, they were told that their money was been paid into a clients account.

No one at BA Peters has ever been charged of any criminal act following the case and stated facts.

The proven and recognised lies did not help the client to get any money back.


I have tried to sign off from this post, but you keep posting so many misleading statements I cant let it go.

Please stop digging yourself (and worst, good honest Yacht Brokers) into such a deep hole.
I think you would be best to let the professional yacht Brokers association handle this who hopefully have the time to look into this more comprehensively .


I'm once again signing off ......................tag paulgooch

 

[gjgm]

Clearly a hot topic !

If you are going to spend that sort of money, house, boat, light aircraft whatever, for goodness sake show some common sense, if you are nervous of a broker client account then don't use it, go see your lawyer and use escrow. If the broker doesn't like it and huffs and puffs then you know your nervousness was warranted, if he is straight he won't care as long as he gets the deal done.

That's quite enough common sense thank you