UK watchdog says most clients will get all cash back from Beaufort

By Huw Jones

LONDON (Reuters) - Thousands of customers of failed British brokerage Beaufort are likely to get all their money back, regulators said on Tuesday.

Beaufort, which specialised in helping raise money for small speculative mining companies, was declared insolvent in March after the U.S. Department of Justice alleged it had a role in a more than $50 million stock fraud and a laundering scheme involving a work by Pablo Picasso.

The insolvency has frozen up to 40 percent of the assets of some of Beaufort's estimated 16,000 clients, comprising retail investors and small companies, which included dozens of junior miners.

"The administrators have confirmed that more than 90 percent of clients who are eligible for Financial Services Compensation Scheme (FSCS) coverage are likely to have losses which fall under the 50,000 pound limit and so will receive back all their client money and custody assets," the Financial Conduct Authority (FCA) said in a statement.

Remaining customers with portfolios of more than 50,000 pounds may not get all their cash back, the FCA said.

The FCA said a four-year wait for compensation would be the worst-case scenario, and that if a plan from Beaufort's administrator PwC is approved by the courts, the distribution of assets should start in September.

Some of Beaufort's customers may have suffered losses due to mis-selling and could bring a separate FSCS claim, the FCA said.

Earlier this month PwC cut its estimate for administration costs to 55 million pounds over two years from 100 million over four years.

PwC has said it has frozen around 500 million pounds in client assets and a further 50 million in cash. Distribution costs will be deducted from this, requiring the FSCS to make up any shortfall to its 50,000 pound cap.

The FSCS's budget is being increased to pay for claims against Beaufort.

(Reporting by Huw Jones; Editing by David Holmes)