Advice firm Lansdown Place Financial Management must compensate a client who complained about the transfer of their pension into a Harlequin fund through a Lifetime Company Sipp.
A Financial Ombudsman Service ruling says Lansdown Place should not have processed the transfer into the unregulated investment.
In 2012, Mr T invested £30,000 of his Sipp into Harlequin after he met with Atlantic Overseas, an unregulated investment company linked to Harlequin.
Mr T signed the Sipp application form and the pension transfer was processed by Lansdown Place, which he did not meet with, into a new Lifetime Company Sipp.
Lansdown Place wrote to Mr T in December 2012 offering a retrospective review of the pension transfer process as part of its ongoing monitoring programme.
It said the Sipp-to-Sipp transfer was not in Mr T’s best interests and accepted no responsibility for this transfer but paid Mr T £100 in “full and final settlement in relation to the transfer”.
The Harlequin investment has since become illiquid and Mr T complained to Lansdown Place and Atlantic about the advice to transfer his pension.
His complaint was rejected by Lansdown Place as it said its involvement was limited to processing the Sipp to hold the investment recommended by another adviser.
Lansdown Place added the connection was clearly limited to the Sipp wrapper, not the underlying investment and the involvement of the other adviser was shown by the Sipp application form.
Lansdown Place also said Mr T made the decision to invest in Harlequin before it was involved and only became aware of the transfer in December 2012 when advised of the transfer by Lifetime.
Mr T referred his complaint to FOS where an adjudicator thought Mr T’s complaint should be upheld as it was clear Harlequin was introduced by an unregulated third party.
The adjudicator said it was wrong Lansdown Place processed the Lifetime Sipp without considering whether the underlying investment was suitable.
Lansdown Place said it had no role in arranging the transfer to the Sipp but the adjudicator referenced the firm’s letter to Mr T dated 11 December which he argued proved the contrary.
This letter recorded “the transfer was processed by Lansdown Place as Lifetime Sipp requires all pension transfers to be completed by a firm that is regulated”.
The adjudicator felt this confirmed Lansdown Place’s involvement as a regulated business and it had responsibilities to Mr T.
Furthermore the adjudicator felt Lansdown Place would have known that Mr T was transferring much of his pension wealth to the Sipp, should have known that Harlequin was a high risk fund and only suitable for sophisticated investors.
The adjudicator did not think Mr T was a sophisticated investor and so Harlequin was unsuitable for him.
Lansdown Place should have made it clear to Mr T that the fund was unsuitable when it processed the Sipp transfer and it could not avoid responsibility by offering a retrospective review.
In its rebuttal Lansdown Place said the wording of December letter was deliberate to avoid alarming Mr T, the pension transfer was handled directly between Atlantic and Lifetime.
Furthermore Lifetime should take responsibility for monitoring suitability.
The case was passed to ombudsman Keith Taylor who sided with the adjudicator.
Taylor says it is clear Mr T is not a sophisticated investor and Lansdown Place as a regulated party had obligations to question the transfer.
He adds Lansdown Place should pay Mr T £250 for the distress caused and pay compensation based on the method outlined in the ruling.
Lansdown Place was not available for comment at the time of publication.