Buying from a broker, what's at risk ?

[jonic]

We'll only see how it is perceived to be

I do have concerns about clients accounts, but not so much that brokers would steal from them though.

I'll risk being accused of kissing your arse again, your own use of a client account is absolutely spot on. You have a properly setup client account and you pay the monies into it. In your case, everyone's money is safe, 100%.

But, there is no requirement to do so. Any old Tom, Dick or Harry can set up and be a broker. He can't legally steal the money, but he can put it in his own account and lose it "by accident" if he goes bust. He could also have a poorly set up account that doesn't give the protection it's believed to give.

I think regulations should be in place that legally require a broker to setup a "proper" client account and to be legally required to place clients funds into it. He'll then be committing a criminal act if he puts the money anywhere else or "borrows" it.

I'm obviously not the only one that thinks brokers should use properly setup client accounts, as it's an ABYA "rule".

I'm inclined to think that an insurance scheme wouldn't be needed, provided the above legislation was in place.

Paul, I completely agree with you.

Until Parliament do add another law to the numerous acts that a broker is already covered by, the public should choose an accredited broker who does operate in this manner and has a confirmation from his bank. The fact is the "problem" is so non-existent that the legislature have not been involved. If there were a problem that warranted that kind of involvement I and all my colleagues would have no opposition to it at all.

 

[Tranona]

I'm obviously not the only one that thinks brokers should use properly setup client accounts, as it's an ABYA "rule".

I'm inclined to think that an insurance scheme wouldn't be needed, provided the above legislation was in place.

I would be very surprised if any broker is not operating a client account properly. The revised recommendations (which only endorsed what was probably already the case) was a direct response to the clarification of the "trust" principles in the Peters case. That is the way our law works - new situations arise which test the law and this is done through the courts. The fact that KPMG had to seek clarification from the courts suggested (rightly) that there was dispute about interpretation of the law. There is now no doubt. However there was no suggestion that what Peters did (wrongly) was widespread practice. Indeed in a typical brokerage (ie not a trader) it is difficult to see how it could have remained undiscovered.

As I have said many times the problem with lost deposits and clients "money" is directly connected with unsecured deposits on new and used boats bought from a trader, not from funds in brokerage transactions. The court case makes the distinction quite clear. And as I said in reply to CF earlier if there is a case for bonding or a compensation scheme it is in relation to this type of transaction. Again it has been proposed in the past - but rejected (in my view wrongly). However the last review did result in the more rigorous new build BMF contract. Regrettably direct buying from a UK builder has also disappeared and security buying through a dealer is not so easy - but not impossible.

 

[Nautibusiness]

I would be very surprised if any broker is not operating a client account properly. The revised recommendations (which only endorsed what was probably already the case) was a direct response to the clarification of the "trust" principles in the Peters case. That is the way our law works - new situations arise which test the law and this is done through the courts. The fact that KPMG had to seek clarification from the courts suggested (rightly) that there was dispute about interpretation of the law. There is now no doubt. However there was no suggestion that what Peters did (wrongly) was widespread practice. Indeed in a typical brokerage (ie not a trader) it is difficult to see how it could have remained undiscovered.

As I have said many times the problem with lost deposits and clients "money" is directly connected with unsecured deposits on new and used boats bought from a trader, not from funds in brokerage transactions. The court case makes the distinction quite clear. And as I said in reply to CF earlier if there is a case for bonding or a compensation scheme it is in relation to this type of transaction. Again it has been proposed in the past - but rejected (in my view wrongly). However the last review did result in the more rigorous new build BMF contract. Regrettably direct buying from a UK builder has also disappeared and security buying through a dealer is not so easy - but not impossible.

There is clearly a lot of confusion from some of the buyers within this thread about what constitutes being a boat broker as opposed to or in addition to being a boat dealer.

 

[Tranona]

There is clearly a lot of confusion from some of the buyers within this thread about what constitutes being a boat broker as opposed to or in addition to being a boat dealer.

Could not agree more. Although the distinction is quite clear if you understand law, it is not clear when you start dealing with somebody. And of course (as in the infamous Peters case) many marine businesses operate as both - and could even be both in related transactions - for example selling a boat on brokerage and buying a boat fom the same person on their own account. And client accounts can hold funds related to brokerage transactions and trading transactions.

Hardly surprising some folks get confused!

 

[Nautibusiness]

Hardly surprising some folks get confused!

Fair does! Not saying it is wrong to be confused, but the distinctions definitely are not clear to many and that is where many of the frustrations lie. If, like our company, you are both broker and dealer it is very easy for the whole thing to become something of a blur for clients who visit and may view a used stock boat, then move on to a brokerage boat and eventually settle for a brand new boat of the model "you" deal in.
Not sure how that can be easily clarified? Save for explaining it at the time if the need arises?

That said, in the situation of a deposit subject to trial it shouldn't make any difference. The deposit still remains placed for the same purpose (commitment) and still remains safe in the event of a failing.

 

[gjgm]

There is clearly a lot of confusion from some of the buyers within this thread about what constitutes being a boat broker as opposed to or in addition to being a boat dealer.

I didnt count how many times I alone mentioned it...lets just say lots and lots !

 

[PaulGooch]

<snip>

That said, in the situation of a deposit subject to trial it shouldn't make any difference. The deposit still remains placed for the same purpose (commitment) and still remains safe in the event of a failing.

It seems you too are mistaken.

If a client places a deposit with a company acting as a broker and the company goes bust before the deal concludes, the clients money is safe in the client account.

If the client places a deposit with the same company for a new boat, or a used stock boat, they are acting as a dealer. If they go bust before this deal is complete, the clients money is not safe. He joins the list of creditors.

 

[Tranona]

If the client places a deposit with the same company for a new boat, or a used stock boat, they are acting as a dealer. If they go bust before this deal is complete, the clients money is not safe. He joins the list of creditors.

No, that is simply not true. You only have to read the Peters case to know that dealers also use client accounts for deposits on both stock boats and boats ordered from a builder.

What frustrates me most about these threads is that people do not recognise both the complexity of the business, nor the specific law that governs particular transactions.

The client account at Peters held funds where Peters were stakeholders in brokerage deals and deposits for new and used boats which they were buying and selling on their own account. The legal status of the funds is exactly the same. They are held in trust for the benefit of the legal owner (who may be a buyer or a seller) to be used solely in relation to the purpose for which the trust was created - that is buying or selling a boat. The dispute in the Peters case was over deposits which Peters had promised would be paid into the client account, but were not. They were paid into an overdrawn general account - so not only were they no longer an asset, but the money belonged to the bank. Peters then tried to transfer funds from the overdrawn account (ie funds which belonged to the bank) to the client account to balance that account. The bank, quite properly as it turned out refused.

As you will see from the judgement a trust only exists if the money (or any other asset held in trust) is clearly identifiable in the trust account. This leads to the recommendation that the client account must clearly show all individual deposits and disbursements as traceable to the client and his business. This is what the latest guidelines clarify.

Sorry to go into what appears to be nit picking detail, but it is on this the law is founded. Extending to everyday circumstances it is vital to understand the capacity and status of the person you are dealing with in the event of a dispute as it is that which determines the relevant law. Most of us never need to go this far because there is no dispute. But if you are proposing changes in law or regulation, then you need to be pretty clear what the problem is and what the potential remedies are.

It is clear from much of this thread, there is still confusion.

As I said in the last couple of posts, my analysis is that the major problem in the boat buying business is with the recent growth in undercapitalised dealers trading in new boats where the buyer does not have a contract with the builder. Might I suggest everybody does a search for the thread on Scuttlebut started by Joker on his experiences with his Polish built Huzar 30 or Gludy with his Trader. When you read these I think you will agree "problems" with brokers pale into insignificance!

 

[PaulGooch]

No, that is simply not true. You only have to read the Peters case to know that dealers also use client accounts for deposits on both stock boats and boats ordered from a builder.

That has not been my experience and it's been said on here before by others.

I bought a used stock boat from a dealer and the deposit went straight into his company account.

 

[DAKA]

Not aimed at anyone in particular but there has been mention on this thread about some contributions not being in keeping with the masses.

This POLL indicates that the vast majority of customers want to see changes and 90% want regulation.

You can fool some of the people all the time, you can fool all of the people some of the time , but you cant fool all of the people all of the time no matter how many posts of misdirection you submit !

 

[Tranona]

That has not been my experience and it's been said on here before by others.

I bought a used stock boat from a dealer and the deposit went straight into his company account.

That may not have been your experience. With all due respects this thread is farcical because of the ignorance of many posters who only see their own narrow view of the world as representative of what happens.

There are many different ways of dealing with deposits and stage payments. You are right that many dealers use the money as working capital - just as furniture stores, double glazing installers, travel agents, car dealers and so on. These firms regularly go bust taking deposits with them. Some industries have bonding schemes BECAUSE their members go bust regularly. There is a case for a similar bonding scheme in the marine industry and it has been considered from time to time but rejected because it was considered that overall the problem was not sufficient to justify the expense and complications of establishing a fair system. And perhaps more importantly that alternatives such as secured deposit contract, bank gurantees, escrow accounts and dare I say it Client accounts were available. It is up to the buyer to satisfy humself that his money is secure - or accept the risk. So perhaps you should direct your efforts towards persuading dealers to use client accounts - and I would support legislation for that - not that I think you would have a chance of getting it!

As I have said over and over again you need to understand the complexity of the issues you are discussing. It is of course OK, indeed valuable for individuals to report their own experiences, but they do not necessarily reprresent the general - only the particular.

Just to re-inforce this point, this thread has had over 6000 hits, your "Poll" over 600 - but only about 30 have even bothered to vote!

Hardly the sign of a mass uprising!

 

[PaulGooch]

As I have said over and over again you need to understand the complexity of the issues you are discussing. It is of course OK, indeed valuable for individuals to report their own experiences, but they do not necessarily reprresent the general - only the particular.

The poll here and the one at WSF (http://www.worldseafishing.com/forums/showthread.php?t=385419) suggests otherwise.

 

[Nautibusiness]

this thread has had over 6000 hits, your "Poll" over 600 - but only about 30 have even bothered to vote!

Hardly the sign of a mass uprising!

I can't remember the exact figures or phrase, but isn't it something along the lines of:

"A happy customer will tell one person.
An unhappy customer will tell ten."

 

[PaulGooch]

I can't remember the exact figures or phrase, but isn't it something along the lines of:

"A happy customer will tell one person.
An unhappy customer will tell ten."

Yeah, the poll is a different scenario though. Every single category of question has been overwhelmingly answered in the negative, against brokers.

Doesn't make you a bad broker. Makes you part of an industry that has a bad reputation for looking after it's customers.

 

[Tranona]

The poll here and the one at WSF (http://www.worldseafishing.com/forums/showthread.php?t=385419) suggests otherwise.

Cannot disagree that a majority of 51 people has been negative. However, I suggest you go on a course and learn how to carry out surveys properly before you even suggest it has any real meaning!

All it means is that around 35 people (so far) are negative about brokers. The "sample" is insignificant, even of the population that has bothered to read the thread. Allowing for more than one hit from some people, probably less than 1 in 10 has bothered to vote! Simple Yes/No questions tell you very little other than Yes/No - and given the ignorance displayed on these threads can only give a general indication of attitudes to simplistic questions.

For instance, what do you mean by "bad experience" - is your definition the same as that of others?

What do you mean by "regulation" - you have little idea yourself and to suggest that everybody who ticks that box "yes" means the same is laughable.

I could go on, but I hope I have said enough for you to get the message

 

[DAKA]

I can't remember the exact figures or phrase, but isn't it something along the lines of:

"A happy customer will tell one person.
An unhappy customer will tell ten."

As Paul says, the Poll does not reflect on your personal business, just the industry you operate in.

If you are suggesting that my bad experience and me posting about it has influenced the poll I would suggest otherwise as the question is clearly

Have you

and not

do you know anyone.

But in the interests of fair play perhaps Paul should invite Scuttlebutts to poll as they will be unaware of the osmosis scam. that involved 4 Yacht Brokers/dealers from the North of England to the South coast.

 

[shogi]

Hi guys,

I bought the ticket to Spain, because I liked the price for a Beneteau....What I need to know when buying from a broker? What paper work I need? can you recomend a surveyer in Alicante?

 

[PaulGooch]

What do you mean by "regulation" - you have little idea yourself and to suggest that everybody who ticks that box "yes" means the same is laughable.

I could go on, but I hope I have said enough for you to get the message

The question was, do people think there is a need for regulation. The VAST majority said yes, in both forums. Take the brokers out that voted and it's almost unanimous.

You could go on, if fact, you do go on. I have to wonder what your vested interests are that make you so against any improvement in the system. Don't feel you need to answer that, it's a rhetorical question.

The poll clearly speaks for itself, end of.

 

[PaulGooch]

As Paul says, the Poll does not reflect on your personal business, just the industry you operate in.

If you are suggesting that my bad experience and me posting about it has influenced the poll I would suggest otherwise as the question is clearly

Have you

and not

do you know anyone.

But in the interests of fair play perhaps Paul should invite Scuttlebutts to poll as they will be unaware of the osmosis scam. that involved 4 Yacht Brokers/dealers from the North of England to the South coast.

I'm off for a pint now, but will post a link to the poll on scuttlebutt tomorrow.

 

[Tranona]

I'm off for a pint now, but will post a link to the poll on scuttlebutt tomorrow.

Hope you enjoyed your pint!

If you seriously think that negative comments from 32 anonymous people (out of 56) at the latest count is sufficient mandate and representative of the THOUSANDS of people who use brokerage services each year then do something useful with it.

Write to the 3 major bodies (BMF, ABYA and RYA) with copies to all the mags with a DETAILED exposition of the concerns of these 32 people. From what I can see based on these threads the concerns seem to be

Brokers give poor service - please give specific documented examples of what you mean

Brokers do not operate client accounts correctly. Please give documented example to illustrate

Brokers favour sellers rather than buyers How?

Brokers refuse to allow trial sails without a commitment to purchase

Brokers will force people to buy a boat they don't like Please give documented examples to illustrate.

Buyers demand "Regulation" Please explain what you mean by regulation, what ills it is meant to resolve and who is going to pay for it.

You may of course hit them in a quiet moment and you may get an acknowledgement because they are polite people, but doubt you will get any more unless you can really show that wrongs have been done - and several hundred posts from people who hold strong views on the subject have failed to provide any convincing documented evidence of the ills that are claimed.