Embattled Sipp provider Berkeley Burke has been granted permission to appeal a ruling that says it failed to vet unregulated investments for one of its clients, Money Marketing can confirm.
In the judicial review Judge Jacobs upheld a 2014 FOS decision against Berkeley Burke for failing to carry out adequate due diligence on a £29,000 unregulated collective investment scheme for a client, called Mr Charlton.
The judgment spelled warning signs for many Sipp providers, who see it as place a duty of care on them to vet unregulated investments for clients.
Money Marketing reported on the case where legal representatives for the claimant Berkeley Burke said FOS’s decision was legally incorrect.
In January Berkley Burke Sipp Administration applied to appeal the decision and said it expected to hear within a couple of weeks whether its submission has been granted.
In a statement today, Berkley Burke Sipp Administration confirms permission to appeal has been granted by Rt. Hon. Lord Justice Hickinbottom in the Court of Appeal, Civil Division.
The appeal to be heard at the Court of Appeal, in a hearing expected for the autumn of 2019, will be in respect of the earlier judgment from Justice Jacobs.
In delivering the reasons for granting permission to appeal to the Court of Appeal, Justice Hickinbottom says: “I am persuaded that this decision is potentially of considerable and wider importance within the industry and for customers, and that the issues raised by it should be considered by this court, which has not considered them before.”
In its statement Berkley Burke Sipp Administration says: “[We] maintain that the FOS has erred in law applying the FCA Principles (‘the Principles’), chiefly Principles 2 and 6, in a way that created a new and unexpected duty of care on the part of Sipp operators- which would also apply to any execution only FCA-regulated financial services operator – to investigate investments before accepting them into a Sipp, overriding therefore even any signed disclaimer obtained from an IFA and/or the investor that the operator was not providing investment advice.”
Berkeley Burke Sipp Administration’s exclusive statement to Money Marketing in full
The impact of the FOS ruling on a £27,000 execution-only investment brought to Berkley Burke Sipp Administration – with four separately signed liability disclaimers by both the investor and his agent – impacts the entire financial services sector.
Unless and until overturned on appeal by the Court of Appeal in a hearing now due this autumn, the judgment handed down by the High Court reaffirms the primacy of the Principles in financial services regulation and importantly the breadth of FOS discretion to decide what is ‘fair and reasonable’.
That primacy, coupled with the freedom of FOS discretion, means that there is to be in effect no fettering of any subjective interpretation of what is ‘fair and reasonable’ by reference to the COBS rules. Operators are rightly asking themselves why bother to have COBS rules in place at all if they don’t provide finality – certainty – to a regulated providers’ duties to its clients.
FCA-regulated operators feel that new rules have been introduced without any of the statutory consultation required by the FSMA.
It has been a long, public-stated aim of the FCA going back as far as 2012 to reduce the number of operators in the Sipp market. Changes to regulatory capital requirements have already had that effect, with the 14 per cent to 18 per cent reduction first envisaged more than achieved.
But the effect of the FOS ruling will have more unmanageable pain. Unless overturned by appeal it will result in that reduction going far beyond that stated aim and most likely spill over into a reduction of other execution-only services.