UK stockbroker Central Markets has developed a new insurance policy to secure retail clients’ funds, should one of Central Markets’ platform providers become insolvent. The first insurance of its kind in the UK is underwritten by Lloyd’s of London and insures unlimited retail client funds (cash and securities), above the £50,000 already covered by the Financial Services Compensation Scheme (FSCS). The new policy is part of Central Markets’ “Trade Assured” brand for the full offering.
The policy will perform following the covered firm entering an FSCS default where the FSCS agree to pay out the guaranteed £50,000 in compensation. The policy will cover the difference between £50,000 and the total deposit. It protects against broker-dealer failure and not against fluctuations in the market, mis-selling or poor investment performance.
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Central Markets will provide the extra security at no direct cost to clients, and have set up a dedicated service team to help clients with any enquiries. The insurance policy itself is placed with Lloyd’s of London insurers. Oval Group, the insurance broking and advisory firm, worked with Central Markets to design the insurance.
Adam Stark, Founder and Director, Central Markets comments: “A year ago this month saw the collapse of WorldSpreads with devastating consequences for traders and the high profile collapse of MF Global in 2011 left thousands of investors with existence-threatening losses. As a natural consequence people have become more cautious and careful with their money. The new insurance product will provide our clients with the extra peace of mind that their money deposited is safe. This type of insurance is already common in the U.S on share dealing accounts, and we think the retail trading industry in the UK deserves to have the same safety net.”
Rupert McLean, Director, Oval Group commented: “This product really is the first of its kind in the UK, and has been created as a result of demand from investors to have extra security. Central Markets have taken the lead in the industry and we expect others to follow suit, as market participants become increasingly aware of the risks that retail trading entails.”