- FCA ordered shareholder compensation scheme launches today, administered by KPMG
- Limited time to claim 30th August 2017 to 28th February 2018
- Investors have to make a claim to receive compensation
- Stability - there may be no point investing in a fund if the manager is considering leaving
- How ISA, SIPP and general holdings are treated differently
Around 10,000 Tesco shareholders are entitled to compensation following the financial reporting mis-statements of 2014 at the rate of 24.5p per share plus interest of 4% for retail investors.
Tesco announced in March 2017 that it would launch a compensation scheme, administered by KPMG LLP, and today that scheme has opened.
Investors who have been affected must make a claim - compensation is not paid automatically.
Stock brokers including Hargreaves Lansdown have been working with KPMG to facilitate a claims process that is easier and simpler for their clients. The opportunity to have your broker help with your claim in this way has now closed and investors must now claim directly through the claims portal KPMG have put in place.
Hargreaves Lansdown has been able to help 1,711 investors (724 SIPP and 987 non-SIPP claims) with their compensation claims.
Danny Cox, Chartered Financial Planner, Hargreaves Lansdown;
"Compensating investors is the final chapter in the accounting saga and Tesco is keen to put this episode behind them, especially as CEO Dave Lewis has got the business moving in the right direction despite challenging market conditions. Stronger trading, particularly in the UK, means that after a 2 plus year absence, Tesco is planning to restore its dividend this year."
"Investors who have not yet made a compensation claim are now on the clock to submit their claims or receive nothing."
How the scheme will work
On 29 August 2014, Tesco PLC and Tesco Stores Limited issued a trading update about its expected first half 2014/15 profit. That announcement was inaccurate and Tesco issued a corrective statement on 22 September 2014. As a result, the Financial Conduct Authority (FCA) has decided that Tesco should pay compensation to some net purchasers (purchases less sales during the period) of Tesco shares and bonds in the period from 29 August to 19 September 2014 inclusive who may have overpaid because of the inaccurate market announcement.
The compensation claims process
Investors need to submit a claim with the administrators of the compensation scheme, KPMG, either via a dedicated claims portal or a postal claim form. When submitting their claim, investors will need to provide their personal details and evidence of Tesco share transactions.
The administrators will then consider the claim and decide the appropriate amount of compensation payable to the claimant under the compensation scheme.
If the claimant accepts this, they will then need to download the Notice of Acceptance and Release discharge form from the claims portal website, sign these documents and then upload them back onto the claims website portal.
The compensation claim will then be processed and paid directly to the claimant’s bank account.
How ISA and SIPP holdings are treated differently
Compensation in respect of shares held within ISA is not paid directly back into the ISA. However the compensation can be paid in without the amount counting toward the annual ISA allowance.
In the case of SIPP investments, claims must be made by the pension trustees. No action is needed by the investor. Compensation will be paid directly back into the SIPP and will not be treated as a contribution. This means the payment will not benefit from tax relief but also not count towards normal annual allowance entitlements.
Do I have to make a claim in order to receive compensation?
Yes. If you do not make a claim, you will not receive any compensation.
How long do I have to make the claim?
Six months from the date the scheme launches, expected to close 22 February 2018.
How will the compensation be paid?
It will be paid as a cash transfer into an account of your choice.
When will the compensation cash be paid?
We are expecting payments to be made approximately 35 days after administrator receives the signed Notice of Acceptance and Release.
How is the compensation calculated?
Calculations are based on a rate of 24.5p per share for net purchases (buys less sales) during the period in question. In addition interest of up to 4% will be paid. This interest is taxable although will be tax free if your shares were held in an ISA or SIPP.
I invested in Tesco shares in both my ISA and general investment account, do I have to make two claims?
No, you will only need to make one claim.
Will compensation paid into ISA count toward my annual ISA allowance?
HMRC ISA guidance indicates that it will not count toward your annual ISA allowance.
I invested in Tesco shares through my SIPP how do I make a claim?
Claims for compensation for SIPPs are being made by the trustees of the pension scheme on your behalf. You need not take any action in respect of a SIPP claim it will all be done for you, however you should check with your pension company that this is being done. The compensation will be paid direct into your SIPP and will not count toward your annual contribution allowance. HL Pension Trustees are making the claim for the HL SIPP investors.
I bought shares through 2 different brokers do I submit two claims?
You need only make one claim for the total of net purchases.
Can I make my claim through my stock broker?
No, you have to make the claim direct through KPMG
Tesco have agreed with the FCA to set up a compensation scheme (the “Scheme”). This has been set out in the Final Notice published by the FCA on its website on 28 March 2017. KPMG LLP (“KPMG” or the “Administrator”) has been appointed to administer the compensation Scheme on behalf of Tesco.
In accordance with the requirements of a Final Notice published by the Financial Conduct Authority on 28 March 2017, Tesco PLC and Tesco Stores Limited have agreed to set up a compensation scheme (the “Tesco Scheme”) for certain net purchasers of Tesco PLC shares and/or certain Tesco bonds, who purchased those shares and/or bonds during the Relevant Period. For further information about the Scheme, you can visit KPMG’s website.