Global. Local. Pershing in Europe.

Investor Account Protection

Pershing is regulated by the Financial Services Authority (FSA) and is required to comply with the FSA’s Client Asset Rules which help protect investor assets in several ways, including:

  • Asset Segregation—in compliance with FSA Client Asset Rules, investors’ assets, under a Model B arrangement, are held in trust in accounts segregated from Pershing’s own assets. Therefore, in the unlikely event of default by Pershing, investors’ assets would be allocated to the beneficial owner. These assets would not be considered as belonging to Pershing and therefore would not be used to repay Pershing’s creditors in the event of liquidation.
  • Verification of Asset Records and Instructions—Pershing is required to perform regular checks to verify that investor assets held in trust are accurately recorded. There must also be specific agreement as to who can issue and receive instructions on an investor’s assets and the extent of their authority.
  • Assessment of Custodians—the FSA stipulates that custodians appointed by Pershing to hold investor assets must be subject to prior and ongoing assessment to ensure that custodians extend the same level of asset protection as defined by the FSA.

Capital Requirements Directive
Pershing is obligated to meet a number of global regulatory requirements in the areas of risk management, capital adequacy, and financial reporting. The Capital Requirements Directive (CRD) focuses on the regulation of credit institutions and investment firms across the EU and implements a revised Basel II framework that relates capital levels more closely to risks. Pershing’s compliance with this and many other international guidelines and regulations, provides our clients and their investors with additional assurances that the firm is adequately capitalised and operates within a best-practice framework.

SAS 70
In addition to ongoing internal review and internal audit procedures, an annual SAS 70 Level II audit is also undertaken by independent external auditors to provide additional impartial oversight of Pershing’s controls and tests of operating effectiveness. The audit focuses on the controls that Pershing has in place which may form part of clients’ information systems. The resulting report is distributed to our clients to assist in the assessment of controls surrounding transactions processed by Pershing.

Financial Services Compensation Scheme
As the UK’s statutory fund of last resort for clients of authorised financial services firms, the Financial Services Compensation Scheme (FSCS) can pay compensation—limited, at present, to a maximum of £50,000—to investors if a firm is unable, or likely to be unable, to pay claims against it. In general this would occur when a firm has stopped trading and has insufficient assets to meet claims or is insolvent. In the unlikely event that Pershing had failed to properly apply the FSA’s Client Asset Rules and had also defaulted on its obligations, eligible investors would be able to make a claim to the FSCS for any assets lost by Pershing. Further information regarding claim amounts and investor eligibility can be obtained from fscs.org.uk.

Insurance - Lloyd's of London
In addition to the existing FSCS coverage, Pershing also provides coverage in excess of FSCS limits for client assets through Lloyd’s of London. This excess account protection offers some of the highest levels of coverage available in the industry today. The excess insurance policy purchased Lloyd's of London provides the following excess account protection for assets held in custody with Pershing Securities Limited (UK) and Pershing LLC (US):

  • An aggregate loss limit of $1 billion for eligible securities -- over all client accounts
  • A per client loss limit of $1.9 million for cash awaiting reinvestment -- within the aggregate loss limit of $1 billion.

Visit www.fscs.org.uk for more information on FSCS and www.lloyds.com for more information about Lloyd's of London.

Additional Insurance
In addition to risk capital, FSCS, Lloyd's of London coverage, and the asset protection offered by compliance with the FSA Client Asset Rules, Pershing has additional insurance through policies in force to protect against financial losses caused directly by events such as:

  • incomplete transactions
  • forgery and fraudulent alteration
  • computer crime and computer viruses
  • extortion
  • physical loss of or damage to the property including subsidence and terrorism
  • public and product liability
  • employer’s liability
  • professional liability (Errors and Omissions)
  • directors' and officers' liability