SVS Securities Ltd (SVS) were a UK regulated stockbroker and wealth manager that was placed into into special administration in 2019 following a FCA invesigation. The Financial Services Compensation Scheme (FSCS) is currently investigating the dealings of the firm and we expect them to start processing claims soon.
in 2018 the FCA had serious concerns over the firm's management of discretionary funds. Many clients had transferred out of defined benefit (final salary) schemes and into SIPPs managed by SVS, however most of those clients were unlikely to be looking for the kind of risk they were exposed to in the allocated model portfolios managed by the firm. Following the FCA investigation, SVS failed to cut exposure to the high risk and illiquid (difficult to sell) bonds and instead increased their exposure, the motive for doing so was high commissions, fees and charges.
Although SVS were ultimately forced to close due to grossly mismanaging client funds, the firm was also heavily involved in selling shares as principal.
Trading as principal simply means that SVS already owned the shares they were selling to clients and profited from any mark up in the share price. Firms acting as principal generally buy shares in companies that are relatively illiquid, i.e there is little or no trading volume. The illiquid nature and high risk profile of these types of shares makes it possible for firms to buy large tranches at a discounted price and when their intention is to immediately sell them to private clients for a large profit, the risk to the firm is minimal but the conflicts of interest are significant.
Firms are allowed to trade in the capacity as principal, however there are very clear rules that have to be followed and customers must be treated fairly. Hallbrook has been investigating this type of dealings for over 10 years and we therefore know what to look for and how to identify the rules breaches.
Firms that breach the rules when dealing with retail customers leave themselves open to a civil liability, which ultimately means clients who have lost money can seek compensation.
Hallbrook are currently representing over 100 former clients of the firm, most of which have now been submitted to the FSCS. If you have purchased shares or transferred funds under management with SVS and would like to find out if you are entitled to compensation then please call Hallbrook today on Freephone 0808 2 818 717