Viva
If you have real substantive concerns, I doubt whether BF would ban you for expressing them on her.
The question thus is, do you have such substantive concerns, or are you just being disingenuous and alarmist ?
Let's give you the benrfit of the doubt on this.
So I would still like to hear the real substance of your concerns, as I am having trouble imagining what they are.

Lest we forget, it's not that long ago these city simpletons thought they had found a way to "eliminate risk". One fool's low investment risk is another man's pension.

Feck
Indirectly you have hit the nail on the head.
You cannot ever eliminate risk in totality.
Naive to think so.
I'm more interested in viva's perception of some sort conflict of interest having a potential impact in the specific area of my trust in BF handling my funds correctly.

Nemesis

When: 27 Jul 11 15:52


As to the suggestion that I have somehow shown disdain for Betfair's customers genuine concerns I am truly perplexed.

Nemesis
When: 27 Jul 11 17:03

@pxb

I should have remembered the saying: Do not argue with an idiot. He will drag you down to his level and beat you with experience.

I thought the saying was "The customer is always right"

Viva, I'm not concerned about this. I find the prospect of being hacked and someone placing crazy bets on my account much more dangerous.

sigh. okay, once more:

customers do not receive interest on trust investments (for legitmiate reasons). therefore, their interest is for the investments is to be as safe (ie low yield) as possible.

the company does receive interest. therefore if people from the company decide on trust investments because they're also trustees, their two different roles create a conflict of interest.

in addition, if the trustees have a personal material interest in the performance of the share price, there is an additional potential conflict of interest, because higher performing investments will affect profits and therefore the value of their shares/options.

again, to stress: this is a description of structure, not any allegation of impropriety. but it's something that seemingly hasn't been explicitly addressed through written safeguards, and imo it should have been.

It all boils down to trust Viva, not conflict of interest.

no, fafh - that's completely wrong. conflict of interest has nothing to do with trust, it's a description of structure.

It doesn't worry me at present, no. it would do more if BF was carrying its own debt load or in any kind of a situation where it was less master of its own financial fortunes.

and I've got to say it's pretty pathetic of you to start accusing me of some kind of scaremongering, for spelling out something you've asked me to clarify, and which is factually true and deliberately phrased to put it in perspective.

this is exactly the kind of stuff that makes you look like a corporate shill.

Btw if I was a corporate shill, what do you think they should be paying me ?
I seem to be doing a lot more harm on here than good.
Perhaps they shuld be paying me to stop posting and getting in everybody's face ?

If I (as a private individual) was given the oppurtunity to invest in whatever I wanted, and somebody else (not somebody I care for) promised to cover the loss in the event of negative return, then I would go for a very risky investment indeed. If there was a limit on how much risk I was allowed to take, then I would go for the maximum risk allowed.

This coming from the guy who won't bet with the best sportsbook in the world because it's based in a country he doesn't like.

Any shareholder/trustee is massively incentivised not to muck about with the trust. If I held, say, £80m in stock and was one of the trustees the last thing I'd want to do is lose a pile of customer money and destroy the company. OK, there might be the odd million quid to make in interest (you can see exactly how much in the recently published results probably) and so on but it's nothing compared to the continual growth and success of the firm. I honestly don't see a conflict unless you believe the trustees are nutters who only think about the coming quarter.

In the situation where the company has taken on a load of debt to, say, buy some competitors out or open a chain of hat shops or whatever, then there's even less reason to risk losing the customers that will end up paying that debt off.

@Viva

I see your point and this is why we have previously considered having an independent trustee (see previous posts as to why that didn't happen). But consider these scenarios, in each case being situations where you put your money on deposit somewhere/anywhere other than in a chest under your bed or similar:

IN THE BANK

What happens if the bank makes bad investment decisions/over extends itself and goes bust? That money is in a bank accounts owned by the bank and it is not in trust - it is contractually owed to you. Well we've seen what happens when banks go bust and we know that the answer is you can lose your money if that bank is not bailed out.  You will however have some cover under the Financial Services Compensation Scheme (up to a cap of about £85k I believe).

WITH A TRADITIONAL BOOKMAKER (or similar)

Your money is likely to form part of the assets of the company as it will (probably) be sitting in a company account. If the company goes bust the liquidator will come and take the money and distribute it to creditors according to their priority (which will probably be a lendor with a fixed or floating charge over the bookie's assets - particularly if that bookie has debt which of course requires security).

IN A TRUST (e.g. the Betfair Trust)

Your money does not form part of the assets of the company - it is held in trust on equitable terms rather than contractual terms. If Betfair goes bust it doesn't matter. If the trustees "invest" your money poorly you may have a claim against them so they are incentivised to be conservative. If they are conservative but still mess up and the banks they have invested money with go under then you have a problem BUT at least the money will not form part of the assets of the bank either because it is still subject to the trust no matter where it sits.

Lets be clear - customer money sits in a variety of bank accounts with reputable banks/financial institutions according to the mandate the Finance Team. It sits in accounts that are in the name of the trustee so the funds remain subject to the trust deed. It does not, by virtue of being an "investment" (which will generally mean a deposit into an account that pays interest), form part of the assets of the entity with which it is invested - it will remain in the name of the trustee subject to the trust arrangement.

I note that in the last mentioned scenario you should also be aware that Betfair's arrangement with its banks is such that if trust funds drop to a point where the total amount on trust is less than the total amount payable to customers PLUS an agreed buffer (which is in the millions) then the banks may be able to trigger certain rights to take control of the funds owed to Betfair companies (i.e. the portion of the trust payable to Betfair companies for services - see clause 7 of the Trust Deed which makes it clear that the bank's share is in priority to our share of trust funds - but no more than that i.e. the bank can't chop into the share of the trust that is owed to customers).

In other words we need to have more money in the trust (i.e. sitting on deposit in accounts with banks as "investments") than all the money owed to our customers PLUS the buffer I refer to (which the bank can increase if it gets edgy). This is why we refer to "ring-fencing".

In these circumstances it has not been possible for me to think of a scenario that results in a loss of money for customers other than multiple banks going bust (all at once) or serious fraud (which would give rise to other claims).

No arrangement for the deposit of funds is completely perfect to the point where you can never be at any risk of losing your funds but, in the circumstances, my considered view is that Betfair's trust arrangement is pretty damn good at protecting customer funds. Probably even one up on a chest under the bed which, after all, could be burgled or taken from you at gunpoint.

This does not get away from the fact that having Board Directors as trustees is not completely ideal from a conflict perspective but again, please see my explanation of why this is so.

Nor does this get away from the hypothetical scenario that Betfair falls on hard times and seeks to use customer money to make higher returns to make profits. However, if you keep in mind the kinds of returns we make from interest on desposits of customer funds (low) as against the kinds of returns from core business activity (high), you should come to the conclusion that making risky investments of customer money wouldn't be very effective nor very clever. This is particularly true if one is actively dis-incentivised from exposure to risk (as our Trustees are when it comes to dealings in client funds for reasons I hope are obvious).

If you die they bleed your account dry with their dormant account charge rather than contact your next of kin. Yet Nemesis claims they haven't yet fell on hard times.

So pxb has been banned it seems?

His profile has been disabled FAFH.
http://community.betfair.com/pxb/go/shield/disabledProfile

As if being called an idiot wasn't punishment enough

I think it's fine to be an idiot on this forum as long as you don't annoy the wrong people.

But probably no more or less than many others.
I'm surprised to be quite honest.
I didn't think that most of his posts warranted any serious consideration let alone concern.
Bit like mine in fact.

FINE AS FROG HAIR
28 Jul 11 22:52
Joined:  12 Mar 07 | Topic/replies: 3,717 | Blogger: FINE AS FROG HAIR's blog
Investor
You must be reading my mind.
I was just about to post that up.
I really would like more assurance from BF that if my account on here is genuinely hacked, then I will not suffer in any form or manner.



You've got a long wait ahead of you FAFH