Risk of Capital Questions- Beyond the FSCS 85k Level.

[Durhamprofit]

Hi IG community,

I believe I have posted this on the right part of the forum. (Sorry 1st post and newbie to the community..so still finding my feet 🙃)

Any help with the following is greatly appreciated. 🤞

Context

I have recently opened an IG UK based Corporate Share Dealing Account (no leverage) via my Ltd Company.

I will be trading ETF’s.

Mainly large Index related ETF’s (e.g. S&P 500 and QQQ), Money Market Funds (Lyxor Smart Overnight Return - UCITS ETF C-GBP etc) or Bonds (TLT)

I understand that any money up to 85k will be fall with the FSCS in unlikely event of IG going to Liquidation.

I will be investing with capital beyond the 85k level.

Questions- Relating to IG

1. I assume that any money I hold with IG as cash beyond the 85k would be at risk in the event of liquidation?

2. If I hold ETF’s assets beyond the 85k but as ETF’s, then I believe my assets would no longer be with IG; and therefore no risk, aside from the risk of holding the ETF of course.

 

Question- Relating to EFT’s

1. If I hold an ETF and the ETF provider goes into liquidation, I believe my assets are safe? As I “own/hold” the ETF and they would be transferred to another provider or  sold and return to me as cash.

2. Linked to this- When I buy an ETF such as TLT or G500- Invesco S&P 500 UCITS ETF GBP Hdg Acc. Is it correct that I now own TLT/Bonds / S&P 500 as an asset. E.G. I would “only” completely lose my capital if TLT or the S&P 500 when to zero.

I sincerely appreciate any help the community can provide.

I have read through the literature from the ETF’s providers, and I will also be contacting them directly to ask for clarity.

However, it is a minefield of information around area such as “counterparty” risk etc.

I’m just keen to ensure that my capital is not at risk- other than the risk of the price fluctuation of the asset itself in the market.

My goal is to avoid that nightmare situation, when somethings happens, and my capital is totally wiped out.

Thanks

[HydroBoy]

The cash in your account should be protected by the FSCS up to 85k for your company.

The assets you buy should be safe if the EFT provider (or IG) goes under unless there was fraud anywhere in the chain, and usually when financial companies go down is due to fraud. For example you might have bought an EFT, but someone cashed the money, bought a yatch and had a wonderful holiday in the mediterranean. This is extremely rare with the big providers, but it is a possibility (never forget Bernie Maddof). If something like this happens you'll probable get a few pennies after 10 years.

This is also why one shouldn't go with providers in regions that are not highly regulated.

[Durhamprofit]

Hi @Hyrdoboy, I do apologise for the delay. I did not realise that my 1st post had been authorised and you had replied. Thank You so much for taking the time to reply and thanks for the insights. Greatly appreciated. Thanks