A message from Gemma, our General Counsel/Head of Compliance:
We’ve had a number of questions on protection in relation to our cash savings account and bonds (also following the thisismoney article), so thought we’d post an update here before we open the bidding process for the next tranche of bonds. As ever we like to make sure you have the full information so you can make an informed choice. We should remind you that if you are unsure about us or any of our products please don’t push yourself outside of your comfort zone by buying them.
In relation to protection on each cash savings account, you receive £85,000 FSCS protection (you’ll recall this is across all your accounts with the Lloyds Banking Group, as the money in your cash savings account is deposited at Bank of Scotland). This level of protection from the FSCS is straightforward – if anything happens to your cash, you are protected.
In relation to the bonds, our aim was to design a product that would encourage people to put money away, without having to worry about their capital being at risk, or the creditworthiness of us at Dozens. This is why we have engaged a trustee to look after your money invested, plus the full interest amount. When you make a purchase order for bonds, your money is still held in Bank of Scotland until the bonds are issued (and then transferred out to Dozens Savings plc only if your bid is successful). In conjunction with the bonds being issued by Dozens Saving plc and listed on NEX, your bond subscription money is then transferred to the trustee (US bank), along with the full 12 months’ worth of interest. US Bank holds this money on behalf of bondholders in case of any issue with any part of the structure. The money is held in a separate account that is not used by US Bank (nor by Dozens) for any other purposes. Therefore if anything happens to Dozens or the Trustee, the money to pay you back your principal plus interest is securely held.
We thought you might like to see what we receive from US Bank to confirm money movement. To explain what you are seeing:
- We had a “test bond” issuance on 15 Feb of 4 bonds, so the full principal of £400 (4 x £100) plus the full interest of £20 (4 x £5) was moved that day into the trustee account.
- On 1 March we had the pilot bond issuance of 906 bonds. This mean £90,600 (bond principal) plus £4,530 (full 12 month interest) was moved into the trustee account.
- total £91k of principal, plus interest of £4550, is held by the trustee
They confirmed receipt of the monies by email, and we can also view a statement showing the full amount, set out below (note we have redacted names and account numbers):
When it comes to FSCS protection for investment products, the FSCS tends to assess issues with investments on a case by case basis and we appreciate it is difficult for our customers to know whether or not they are protected for investments (including our fixed interest bonds). We also know that the £50k limit for this kind of protection rises to £85k in April 2019, making it harder for customers to distinguish between this and the deposits £85k protection (relevant to our cash savings accounts).
Given the potential lack of clarity in this and given that we also believe that FSCS protection is an avenue of last resort and not a certain form of protection when it comes to investments, as customers and investors you should be comfortable that the firm you buy bonds from has put in place sufficient measures and protections to keep up their end of the bargain. We believe we have done this in relation to the trustee structure. We have therefore decided to remove any mention of FSCS protection in relation to our fixed interest bonds (you may have noticed we did this already with our FT ad earlier this month). Of course you may not agree with this, which is completely fine, and in which case we would suggest you look at other investment products on the market that provide you with more comfort.
Current account : your money is held in a segregated client account at a UK high street bank in accordance with the FCA requirements and the Electronic Money Regulations 2011 (not FSCS protected), which means that dozens has no access to your money for its own purposes
Cash savings account : your cash savings are protected by FSCS up to £85k
Fixed interest bonds : a trustee structure is in place to safeguard your principal sum invested plus interest
Investments : the value of your investment may go up as well as down, which means that your capital it at risk
Thank you for all your messages asking when the bidding opens for the next tranche of our bonds. The answer is soon – we are just putting finishing touches to updated screens in our app to make sure the process is as clear as possible for everyone. We’ll let you know as soon as the bidding is open.