If you choose to invest your money with a company that has been granted authorization by the Financial Conduct Authority (FCA), you are afforded a large degree of protection in the event that you are dissatisfied with the service that you have been given.

Which kind of investments are risk free?

There is always the possibility of incurring losses with any investment you make.

However, the Financial Services Compensation Scheme (FSCS) and the Financial Ombudsman Service (FOS) protect investors who choose to work with particular investment service providers (FOS). That ensures you’ll receive your money back in the event that they go bankrupt.

In the event that your provider fails, you may be eligible for compensation from the FSCS in the amount of up to £85,000. The FOS has the power to order a company to pay you more than £350,000 in compensation.

However, in order for your investments to be considered for help, they must satisfy the following criteria:

Arrangements for the Compensation of Financial Services Financial Industry Regulatory Authority
£85,000 limit per person, per provider £350,000+ limit (increases with inflation)
Financial Conduct Authority must oversee the provider in order for them to qualify for regulation (FCA) Financial Conduct Authority must oversee the provider in order for them to qualify for regulation (FCA)
FCA must be involved in the regulation of investments. The provider calls the United Kingdom home.
The provider calls the United Kingdom home.

*you may still be able to make a claim even if the unregulated investment was suggested to you by an independent financial adviser.

In the event that an investment does not meet expectations, what legal recourse do I have?

Few, as neither the FSCS nor the FOS is intended to compensate for bad performance on the part of the company.

This can lead to differences that are unclear, such as in the following completely hypothetical example:

If you invested through a well-known investment site like Hargreaves Lansdown and it failed, you would be protected by the Financial Services Compensation Scheme (FSCS).

If you were a shareholder in Hargreaves Lansdown and the company went bankrupt, whatever money you had put in the company would be lost to you.

You also wouldn’t be able to file a complaint with the FOS because there wouldn’t be a company left for you to lodge a complaint against.

If you were sold an investment without being made fully aware of the dangers involved, and that investment subsequently performed poorly, you may be eligible to file a complaint with the FOS.

How can I determine whether or not a particular investment firm is regulated?

Always make sure to check a company’s status on the Financial Services Register before doing business with them. Con artists may simply manipulate a website to display the FCA and FSCS emblems, as well as numbers that appear to be legitimate.

You are able to search the register by using the company name, the name of a person of interest, a postcode, or the unique reference number of the corporation (FRN).

The record also contains names and warnings for businesses that are currently the subject of an inquiry.

Is the investment subject to any regulations?

Keep in mind that even companies that are regulated by the FCA can nevertheless sell investments that are not regulated.

If you invest your money in them, it is highly unlikely that you will be covered by the Financial Services Compensation Scheme (FSCS), unless the investment was the consequence of poor advice from an independent financial adviser.

The following are examples of unregulated investments:

Along with their counterparts, cryptocurrencies such as Bitcoin
Peer-to-peer investments
Luxury expenditures such as expensive wines and works of art
Investments in unusual areas, such as parking spots, cemetery plots, or shipping containers, for example

When in doubt, do not make an investment. Carry out additional study, and make use of the FCA’s Warning List.

Also, be aware that even investments that are regulated can carry a very high level of risk.

Putting up a claim for compensation with the FSCS

If an authorised firm caused you to lose money due to their dishonesty or negligence, you should generally seek restitution through the firm in question (using FOS if your complaint is not originally upheld).

If the company goes out of business, however, any possibility of you receiving payment from the company would be lost.

Creating an account with the FSCS on their website is the quickest way to file a claim. After that, you will be prompted to upload any supporting documents, which may include emails and statements. According to the FSCS, this procedure takes around one hour and ninety minutes.

Claim forms can also be submitted through telephone (0800 678 1100) or through the mail.

Before you make a claim, you should also take into consideration the following:

Money accounts for customers

Numerous investment platforms store your money in individual client money accounts, which are often held at banks in the UK.

This ensures that even in the event that the platform is rendered inoperable, your funds will remain secure, and you will not be need to wait for platform administrators to retrieve them.

In this particular scenario, you won’t be required to file a claim with the FSCS.

Claims management companies

Because filing a claim with the FSCS is completely without cost, there is no advantage to employing the services of a separate claims management business.

Be sure that you are accessing this page through the official FSCS website, which can be found at https://www.fscs.org.uk/.

Bringing a complaint to the attention of the FOS

If you are dissatisfied with a financial product, service, or advice provided by a regulated firm, your first step should be to file a complaint with that specific firm. Your complaint needs to be resolved within the next eight weeks.

You have the option of bringing your case before the FOS if you have not received a response within this allotted amount of time or if the complaint has not been upheld.

The Ombudsman Service has the authority to require a company to put things right and give you compensation of at least £350,000. (this increases each year with inflation).

You have the right to file a lawsuit against the company in the event that you are dissatisfied with the decision of the ombudsman.

On the other hand, this can be a time-consuming and expensive endeavour, whereas going to the FOS is completely cost-free and does not require you to have a legal representative present.