Although I posted this question more than a year ago, I subsequently read information which may be of use as an answer, specifically regarding Pritchard Stockbrokers in the UK several years ago, in which the FSCS stepped in to compensate investors, as detailed in the following:
http://www.fscs.org.uk/what-we-cover/questions-and-answers/qas-about-pritchard-stock-6n940n01k/
http://www.ft.com/cms/s/0/89957c56-21e4-11e3-9b55-00144feab7de.html#axzz3crZYbGZ9
For reference, in case the links above are at some point in future taken offline, the FSCS FAQ states:
Q: I had “deposited” money with Pritchard so can I expect £85,000 compensation from FSCS?
A: No. Pritchard was not a deposit-taker so the money held does not qualify under regulatory rules as a deposit. The money will be treated as an investment, which carries maximum FSCS compensation of £50,000 per person. FSCS has no discretion to pay any more.
Q: What happens if my losses are over the FSCS maximum of £50,000 and I accept the FSCS’s compensation?
A: If you choose to accept compensation from FSCS, you will be required to assign (or legally transfer) to FSCS all of your rights to claim in the Administration. FSCS will then claim in the Administration standing “in your shoes” and will claim for the whole of your loss, even if it was over £50,000. When FSCS receives the dividends in your place it will then pay to you any amounts recovered to ensure that you do not suffer a disadvantage for having accepted FSCS compensation first.
Example 1:
Loss = £80,000
FSCS compensation = £50,000
Dividend of 50p/£ received by FSCS = £40,000
FSCS pays £30,000 to claimant so he is fully compensated (total £80,000), and retains £10,000 recovery for itself
Example 2:
Loss = £100,000
FSCS compensation = £50,000
Dividend of 50p/£ received by FSCS = £50,000
FSCS pays £50,000 to claimant so he is fully compensated (total £100,000), and retains nothing for itself
FSCS does not have to have make a full recovery of its £50,000 before it starts paying its dividend recovery on to claimants.
Claimants are not compelled to claim from FSCS, or to accept the FSCS offer of compensation. If a person does not want to transfer his legal rights to claim in the Administration to FSCS in return for accepting the payment of compensation, then s/he can decline our compensation and continue his claim in the Administration. After s/he has received the dividend(s), s/he can then return to FSCS to claim for any remaining shortfall.
Therefore, the answer provided by @DumbCoder was correct, but in circumstances where fraudulent activity would mean otherwise, the FSCS was willing to intervene on the behalf of investors.