The risks with using online “brokers”

When I first starting developing my brokerage, I carried out a little market research by posing as a potential client to a handful of online “brokers”. It was a lot of fun but the results were startling and illuminating. Quite frankly the “best” deals they could find me were invariably astronomically priced and they simply didn’t take into account the requirements for my facility (overseas debtors for instance), suggest a meeting or make any effort to know my (imaginary) business. It would rightly described as a joke if it was in any way funny

These were little more than fronts for certain lenders and in a couple of cases they were a front for just one lender masquerading as a “broker” exploring the full market. Under consumer law, the FCA would have thrown the book at them

A prominent lender backed off this rather seedy behaviour a few years back but today ‘ive heard of another example. I cant name names of course but a business development manager for one lender has set up an “online brokerage” through his wife. Clearly anyone unfortunate enough to utilise this site will be pointed in one direction.

In a roundabout way, this works in favour of brokers such as myself who rely on reputation and service. The more that online brokerages are discredited (and my experience is that clients remain very sceptical) the better it is for those that actually believe in delivering the best solutions

History of Venture Capital. A quick review

Sebastian Mallaby is a superb financial journalist, as proven by his excellent and very readable biography of Alan Greenspan.

This is his latest and the only fault with it is the rather tacky and dull cover. Never judge a book of course and inside is a truly riveting history of venture capital which combines both the wilder eye widening tales with skilled overall judgement.

A good review here

HSBC. Damaged through Russian ties?

Those of us with long memories may remember the boycotting of Barclays Bank in the 70s and 80s over its ties with apartheid South Africa. For Barclays, the action was probably just symbolic at the time because the boycotters were largely permanently skint students but these were also accounts lost for the future, many of which could well have been lucrative

HSBC is being severely criticised for maintaining strong links with Russia whilst other banks are steadily winding down their presence. Given the polling results detailed in then linked article, im surprised that HSBC are so blasé about their continuing links. The situation in Ukraine is disgusting of course and the focus on those deemed to be propping up the Russian economy is only going to increase. And its not only consumers who are likely to vote with their feet these days. Businesses will be wanting to be seen to be “doing the right thing” and this could even reach the point whereby businesses are highlighted for their links to this bank.

Even the Times is running a main feature on how to remove your account from HSBC. A fair demonstration of the strength of feeling out there

HSBC should move fast to put distance between itself and the revolting Putin regime

Cyprus. The Russian effect

One economy that has long had ties to Russia is Cyprus. Many of us have handled financing leads where both Russia and Cyrus entities sat side by side and understandably many lenders have been reluctant to engage.

This is only a small piece of the jigsaw but there has been some good news and perhaps Angela Merkel’s Germany should have taken note. As quoted in the linked article Cyprus has “gone a long way” towards “untying its knots” with Russia over the last decade. This has been partly at the behest of the EU which again raises the question of Nordstream2.

Its remains a mixed picture within Cyprus but if the small island could take steps to unravel itself from dependence on a regime which was always going to be troublesome then why couldn’t a major EU economy and where was the pressure from the EU? The EU certainly has long had a record of pressurising small states but not the greater powers

This is not a swipe at Germany as a whole, who have responded to the crisis fairly emphatically but for all Merkel’s qualities, her governments decision making regarding Russia and fuel must be one of the worst geopolitical decisions since the second world war

Arena TV. Arrests and more details

It’s not a surprise that arrests have followed the collapse of Arena TV. With 55 lenders exposed to a £280m deficit between the value of the assets and the lending secured upon them, clearly something was very amiss

The question that has arisen is how on earth did they manage to convince lenders to repeatedly lend against the same items of equipment over and over again? Surely the checks would have been thorough?

They were thorough but not thorough enough. I clearly have to be careful what I say here but allegedly the whole “fraud” was exposed when an auditor checked one of the serial numbers of the financed units with the manufacturer only to discover it did not exist. You can imagine the chill down the spine…

How did this come to pass? Many questions will be raised of course and I have already noticed increased diligence from equipment financiers. I should perhaps refrain from communicating the detail that is circulating in the market but the alleged lengths that Arena TV went to to enable this “fraud” were apparently extensive and included trips half way around the world

Russia. What next for traders?

The precise details of sanctions are not at my fingertips just yet and of course it would be extremely risky for anyone to continue trading with Russia in the current climate. In fact we can assume that the situation is not going to change for the foreseeable future. No complaints. The human rights of the Ukrainians trump any financial concerns

But for those currently involved, the question is what to look for? What are the risks going forward?

I do not have a comprehensive overview but this is a very well produced guide from the DTI on sanctions

It is also worth remembering that trading in any form can affect ability to source credit. A few years back I had a French client that wanted to initiate invoice financing through the uk for staffing to large oil companies around the world. A straightforward and interesting proposition but one of the states multinational oil companies they were supplying to was The Central African Republic which at that time was on the UK sanctions list (although not the French I seem to recall)

That made it impossible to raise finance through the uk. Just the mere presence of transactions through this state on the sales ledger would invalidate any possibility of funding

Exporters to Russia need to keep this in mind