It is not illegal for you to take cash out the account.
When rouges get caught they just claim at the time they took the money out they intended to pay it back and a prosecution is unlikely hence we dont hear about many cases.
It is also possible that your trust account has technical issues which will allow an administrator access to your perceived clients funds, (I have no doubts from your post that you are the type of person with high morals and your business will remain solvent) but these issues put clients funds at risk with other brokers even if not in your case.
If the marine industry wish to carry on holding money which does not belong to them then a compensation scheme needs to be funded and an act of parliament is required, not good intentions.
And even if it was, why bother to do that before knowing if the new owner wants to change the registration at all?!?
Was the boat moored in Lignano ("Punta Faro"), or actually in the bigger "Aprilia Marittima" area nearby (turning left on the main road, a couple of miles before arriving to Lignano)?
Because if the first, a friend of mine is a regular around there. If you pm me the boat name, I can ask him if he knows anything about her.
Sorry for the weather, I hope you at least took the opportunity to try some sea food at Bidin restaurant.
That alone is almost worth a trip down there.
PS: any findings on those weird consumption numbers of the previous survey?
Of course it is illegal for somebody to take money out of a client/trust account for their own purposes! Just "borrowing" it would not be a defence!
Of course there is no "legal" requirement for a broker to use a client account. How could there be? Individuals are free to contract in the way they want. The law is there to provide the mechanisms to do this effectively.
As to the marine industry "holding money" - as Imperial has pointed out it does not normally hold money for any length of time when acting as agent. With new boats more significant sums are held but they are within the terms of the contract, which are very similar to the HISWA contract described above.
As to an Act of Parliament - what would that say and how would it provide any better protection than is already available under the current laws of contract, agency, trust and consumer protection?
Now even if my understanding is incorrect it still has a place in this thread as Yacht Brokers and Legal experts such as your good self need to understand some of the fears and apprehensions that potential buyers/sellers have.
"Of course it is illegal for somebody to take money out of a client/trust account for their own purposes! "
As there is no legal requirement for a trust to exist then the Trust may not be formatted correctly, in which case it isnt trust money and it can be borrowed or in the case of administration the Administrators would be legally obliged to use it to pay other creditors. Two years ago I could understand why some may assume I am trolling or talking from my rear end but now we have the Peters case for an example.
"Just "borrowing" it would not be a defence!"
Its the no 1 defence, no sign of any prosecutions from Bptrs or Tcapl perhaps if you were a judge you could see through the nonsense and find guilty but in reality CPS know it is incredibly difficult to win successful fraud cases.
'"Of course there is no "legal" requirement for a broker to use a client account. How could there be? Incontract, agency, trust and consumer protection?dividuals are free to contract in the way they want. The law is there to provide the mechanisms to do this effectively."'
If an act of parliament was passed to the effect Yacht Brokers cant hold client money unless it is in a statutory trust account then the money in the trust accounts couldnt be used by anyone other than the owner.
"As to the marine industry "holding money" - as Imperial has pointed out it does not normally hold money for any length of time when acting as agent. With new boats more significant sums are held but they are within the terms of the contract, which are very similar to the HISWA contract described above."
BPetrs or Tchaple presumably didnt hold money for long but long enough for a few to get their fingers burnt
"As to an Act of Parliament - what would that say and how would it provide any better protection than is already available under the current laws of "
As above, and it could also force a compensation scheme to be funded in the same way as the Law society and Insurance Industry, its not rocket science, its already in place to protect other consumers.
I am more than happy to agree you have a sound legal understanding of the situation, however in practise Trust accounts are incredibly difficult to format correctly (not for you no doubt but for the Brokers, and the various Marine federations who are currently purporting to give guidance, have you read it ? )
"3.2 The Member shall set up a Client Account, designated as such, and identified at the Bank as such, where he shall hold all client monies, as these monies are held in trust for the client and are not to be used for company purposes."
Nice bit of advice perhaps written by someone who doesnt really know how to achieve this but it sounds good , but this is where I fear the theory and reassurances of the trade associations stumbles, it needs further explanation and legislation.
Last edited by DAKA; 07-03-10 at 12:41.
Very woolly thinking! What are yoiu trying to legislate against?
1 There is no compulsion to use client accounts. There are other mechanisms available to facilitate transactions if you wish. However, client accounts are well established as is the law regulating their use. Brokers get advice from their trade bodies on how to do them properly and thousands of transactions go through them every year without problems.
2 In all these threads NOBODY has come up with a real case of a Broker stealing from a client account and clients losing out.
3 Your examples are not problems with the operation of client accounts. BA Peters was an issue about what was covered by the client account. There was no suggestion that the account was not operated correctly. The issue was about which funds legitimately came within the trust. The advice now is that anyone paying funds to a client account should obtain confirmation as to where the funds were deposited. This is absolutely clear in for example ABYA procedures and advice given to clients by bodies such as the RYA. Unless you know somerthing that is not in the public domain, there is no suggestion that Tony Chapell, whatever else he may have done or not done, has stolen from a client account.
So, what is the problem you are trying to solve with an "Act of Parliament". To change the law (or create a new one) you have to demonstrate that there are wrongs that cannot be dealt with by the existing law. This is clearly not the case here.
Similarly, if you want to create a compensation scheme, you have to demonstrate people are losing out in a way that they are not able to remedy using existing laws. Again not the case here as there is no evidence of losses. However if there are losses, you have to demonstrate the probability of these losses occuring, the situations in which they occur and the sums involved. You can then establish an insurance risk (which is what a compensation scheme is) that prices that risk and requires premiums (ie additional costs) from all participants who want to be protected from that risk.
As there is no identifiable and measurable risk in using client accounts there is no need for insurance and no need to incur unnecessary additional costs.
There are of course potential holes in all laws that govern relationships between people which dishonest people can seek to exploit for their own benefit. That is why we have laws that are tried and trested to be fair to all parties. However, you can never legislate totally against dishonesty except perhaps by a law that makes any criminal action punishable by something nice like hanging, drawing and quartering. As you know this was a common punishment 400 years ago - but the fact that the punishment was used regularly suggests that even that was not a deterrent to a determined offender!
As has been pointed out over and over again in these threads, you cannot remove risk completely from transactions which are often complex and involve large sums of money. However there are more than enough mechanisms available to virtually eliminate that risk. If you do not feel you understand enough about the risks to deal with them yourself, then take professional advice. This will of course cost, but gives you the protection you need against your potential mistakes by paying somebody else to take responsibility for them.
With all due respect to brokers present here, I am convinced that some unscrupulous brokers dip into client accounts to fund day to day costs of their business and hang on to clients' money to make a bit of interest. It wasn't that long ago that you could make 0.5% on depositing money for just one month which is a sizeable bit of bunce on top of the usual broker's commission.
As we have argued regularly on this forum, there may be a legal remedy against a broker misusing client accounts but by the time it is applied, the money is long gone usually
Legislation gives the Broker an option
Hold money in a statutory trust account and pay towards a compensation scheme
Dont hold on to money that doesnt belong to you.
I think most people would trust a Solicitor more than a Yacht Broker to hold money, Solicitors have compensation schemes.
Insurance brokers have compensations schemes
Banks have compensation schemes
Are you suggesting Yacht Brokers are more trustworthy or solvent than others ?
I must be missing something obvious
Really would like to see some concrete evidence to support the statement in your last paragraph. I do not recall seeing ANY documented cases of brokers stealing from client accounts, let alone being long gone.
By all means raise the potential problems and discuss ways of avoiding them - that has been a very useful outcome from this thread - but don't say things happen that don't seem to unless you have evidence to support your statements.
I thought there were examples above , a Corniche or Turbo 36 among others ??
March 24, 2017
March 24, 2017