Halifax T&Cs

In the wake of the collapse of MF Global, where investors lost money due to the fact that their investments were pledged as security, I thought it prudent to start digging through the T&Cs (Terms & Conditions) of my brokerage accounts to see if there are any nasties lurking in there.

Extracts from the Halifax Share Dealing Service Terms and Conditions 1/338070-1 (03/11) (NOTE: if you're using a CFD account, different T&Cs will apply, and may be materially different wrt hypothecation)

From section 7.2:

We will not lend or deposit by way of collateral any investments in your account to a third party without your express permission.

Section 7.7:

We will hold your funds so that we
comply with the FSA Rules. This means
that we will hold your money, along with
money belonging to other customers, in
a pooled client money account with an
approved bank

Section 7.8:

In the event of an approved bank being
declared in default we will make a claim
on your behalf, including, where
applicable, through the Financial Services
Compensation Scheme. Under the
Financial Services Compensation Scheme,
compensation of up to £85,000 of funds
held with the relevant approved bank is
available to eligible claimants. You should
note that the £85,000 limit applies to the
aggregate of all your claims against the
relevant approved bank, including any
claims you may have directly against the
relevant approved bank. As such, you may
lose all or part of your funds.

Section 7.9:

If you ask us to deal in overseas
investments for you, we may hold your
money in a bank account with an approved
bank outside the UK or pass your money
to an intermediate broker or agent,
settlement agent or Over The Counter
(OTC) counterparty outside the UK. In such
circumstances the legal and regulatory
regime applying to the approved bank,
intermediate broker, settlement agent or
OTC counterparty will be different from
that of the UK and, in the event of a failure
of the bank, intermediate broker,
settlement agent or OTC counterparty
your money may be treated in a different
manner from that which would apply if
your money was held by a bank
intermediate broker, settlement agent or
OTC counterparty in the UK. Where we
hold your money in a bank account with an
overseas approved bank, such bank may
be entitled to combine the account with
any other account or to exercise any right
of set-off or counterclaim against money
in that account in respect of any sum owed
on any account of ours.
We will not be liable for the solvency,
acts or omissions of any third party
referred to in this Term.

Section 11.12:

If we appoint a custodian to act as our
nominee in respect of investments that
are subject to the law or market practice
of a jurisdiction outside the UK:
• different settlement, legal and
regulatory requirements may apply
from those in the UK; and
• there may be different practices for
the separate identification of safe
custody investments.

Hmmm, who knows what could be lurking in that statement.

Section 11.13:

We are a participant in the Financial
Services Compensation Scheme (FSCS).
As you have been categorised as a retail
client, you may be able to make a claim
on this Scheme if we default in our
obligations to you. Compensation of up
to 100% of the first £50,000 of assets held
is available to eligible claimants. If you ask,
we will send you a summary of your rights
under the Financial Services
Compensation Scheme. Further
information can also be obtained from
the Financial Services Compensation
Scheme.

Section 11.14:

Your investments will be pooled with
investments held for other clients.
This means that your investments will
not be identified by separate certificates.
Our nominee companies are owned by
us. If our nominee defaults, we accept
full responsibility for it. We will not
disclaim losses arising directly from its
fraud, wilful default or negligence.
We are wholly owned by the Lloyds
Banking Group.

Hmmm, the problem is that in the event of default, we can't be sure that Halifax will be able to make good on this promise.

Section 11.17:

We are not responsible for any loss
incurred as a result of the actions or
omissions of any third party.

Comments? Am I being too paranoid? Not paranoid enough? If you perform an audit of your own brokerage account, then please feel free to link below.