NatWest sold one third of a customer's BT holding in a single-company PEP to pay the second instalment without the shareholder's knowledge, nearly two weeks before the Treasury deadline for payment.
Fidelity Brokerage imposed an even earlier deadline on its 800 BT PEP holders. It demanded payment or instructions by 7 February, or it would sell shares to meet the call. One customer, Miss Kwan from Putney, wrote to the Independent: 'The second instalment is not due until 1 March. And yet Fidelity demanded payment by 7 February.'
Marcus Evans, Fidelity Brokerage PEP manager, said: 'We are only trying to safeguard our Pep- holders' interests.' He said the company had sold shares in 13 plans to meet the second call.
Just over one million people are due to pay the second instalment on BT3 shares by 1 March. Shares were sold to the public in July last year and shareholders had to pay for the shares in three instalments. About 400,000 people have paid the second instalment. The last instalment is due in October.
Wilfred Haswell from East Grinstead, Sussex, who holds his BT shares through a single-company personal equity plan run by NatWest, had 600 shares and had set aside money for the instalment.
However, he made the mistake of going on holiday during January and the beginning of February. When he returned, he found a letter from NatWest dated 17 January saying that it needed the payment of the second instalment by 11 February, 13 days before BT's share registrar, Lloyds Bank, needs cheques for the second instalment.
Mr Haswell's letter from the bank explained that if it did not receive payment then it would sell some shares to meet the call.
'I immediately rang them on 15 February, hoping to prevent disposal of the shares, when I was told that part of my holding had been sold on 11 February.
'My protest was that this was without my knowledge or consent, not having seen their letter of 17 January.' The bank had sold shares worth about pounds 225, leaving him with shares worth pounds 375.
NatWest said the terms and conditions of the PEP meant it had the right to sell shares to fulfil the call.
It said the early date was to allow for settlement of any shares that needed to be sold to pay for the second instalment. Jonathan Haile, NatWest PEP product manager, said: 'If we did not act to cover the call, and the client did not produce the cash in time, the PEP would be void.'
The Treasury this week asked BT interim shareholders to organise the payment of the second instalment as soon as possible. Stephen Dorrell, Financial Secretary to the Treasury, said: 'I would urge holders to put payment of the second instalment in hand now.'
If the second call is missed then the Treasury will reclaim the shares and sell them. Shareholders will be entitled to a maximum refund of 150p per share - the purchase price. The refund will be less if buying and selling costs result in a loss to the Treasury. This is unlikely with shares trading at 331p. Anyone selling shares now will be liable to pay for the second instalment.
Many companies will not operate single-company PEPs where, as in the BT case, shares are partly paid.
Barclays Stockbrokers has 10,000 British Telecom single-company PEPs. The company wrote to all its PEP holders in January asking for payment of the second instalment on the shares by 8 February.
For investors at the pounds 3,000 investment limit on their PEP, Barclays went ahead and sold some shares to pay for the call.
Justin Urquhart-Stewart, director of Barclays Stockbrokers, said: 'We can't fund it ourselves. We have to protect the PEP.'
He said the company would not automatically sell shares to meet the call if the PEP was not up to the pounds 3,000 limit.
ShareLink, which has tens of thousands of BT single-company PEP holders, said that it is giving its customers until 21 February to come up with the payment. Nigel Bartram, ShareLink marketing director, said: 'We have sent out two reminders. If we have not received payment by the date we will sell shares to cover the call.'
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