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Berkeley Burke loses High Court appeal against FOS

Embattled Sipp provider Berkeley Burke has lost its judicial review in a landmark High Court ruling published today.

The ruling is over a longstanding dispute between Berkeley Burke Sipp Administration and the Financial Ombudsman Service.

The judgment establishes with greater certainty whether Sipp providers have a duty of care to vet unregulated investments for their clients.

In the ruling, Judge Jacobs says asking a Sipp provider to check an investment in a foreign country is simply an application of existing due diligence requirements.

A spokeswoman for the FOS exclusively told Money Marketing: “The court has now determined whose responsibility it is as to what due diligence requirement a SIPP provider needs to make before accepting the investments. This clarity can only be a good thing for industry.”

Money Marketing reported on the case where legal representatives for the claimant Berkeley Burke said FOS’s decision was legally incorrect.

Representatives went on to say the FOS ruling misapplied conduct of business rules to Sipp providers and could create due diligence obligations for them retrospectively.

QC James Strachan, who represented the FOS, the defendant in the case, told the court today that asking a Sipp provider to check an investment in a foreign country is simply an application of existing due diligence requirements.

In the ruling Judge Jacobs effectively sided with FOS’s argument and says: “I do not accept that the Ombudsman, in his decision, was creating a new rule at all. His approach was simply to identify the existing rules, specifically the principles, which had been consulted upon, and then to decide how those rules applied in the context of the particular facts before him. This is apparent from the decision as a whole.”

In 2011 a client, known as Mr Charlton, invested his money into plots of agricultural land in Cambodia via a Berkeley Burke Sipp.

In 2014, the FOS ruled against Berkeley Burke for failing to carry out adequate due diligence on the £29,000 unregulated collective investment scheme.

Berkeley Burke has responded directly to Money Marketing that it will be appealing the decision.

In response to the ruling, the FCA has issued a Dear CEO letter to Sipp providers.

Sipp provider Curtis Bank group communications director Greg Kingston says: “The ruling has clear limitations to this case. But the likely outcome is Sipp providers with significant exposure to unregulated assets will review their due diligence processes.

“There is an expectation this will accelerate the sale of Sipp providers or part of their books. Other Sipp providers will anticipate or expect the FCA or HMRC to work with them to manage poor books to good health.”

In an update given to Money Marketing on 2 November Berkeley Burke confirmed it is seeking to appeal the High court judgment in the judicial review.

A statement from Berkeley Burke says: “The effect of the judgment – which we are seeking leave to appeal –  is to grant unpredictable, new, subjective powers of interpretation to FOS over and above the certain rules and regulations laid down by statute and enforced by the financial regulator for the safeguarding of both customers and all regulated financial services providers.

“Until overturned by appeal, the judgment grants a green light for the FOS to decide unilaterally on what is fair and reasonable for all and any actions of a Sipp administrator, or any other FCA regulated financial services provider, when offering execution-only services, thus removing any safeguard for a provider to rely on its adherence to the FCA’s own COBS rules and principles which should ordinarily take precedence.”


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. “Firesale”

    I fear this maybe a “everything must go” scenario for a lot of SIPP providers

  2. I thought that SIPP Stoud for Self Invested Personal Pension.

    In that case should the SIPP provider be vetting the suitability of the investments.

  3. I won’t say the law is an ass or that the judge must have been nobbled, but . . .

  4. It is worth noting what the FOS said BB should have done and the judge agreed…

    Identified SA (the investment in question) as a high-risk, speculative and non-standard investment, so it should have carried out sufficient due diligence.

    Considered whether SA was appropriate for a pension scheme.

    Ensured that the investment was genuine and not a scam, or linked to fraudulent activity.

    Independently verified that SA’s assets were real and secure, and the investment operated as claimed.

    Ensured that the investment could be independently valued, both at point of purchase and subsequently.

    Ensured Mr C’s SIPP wouldn’t become a vehicle for a high-risk and speculative investment that wasn’t a secure asset, and could be a scam.

    The FOS said this was good practice and within the expectations of the rules (in particular Principles 2 & 6) at the time of the investment in 2011, i.e. there was no application of hindsight here.

  5. At the time when Berkeley Burke were processing these esoteric investments, many at Berkeley Burke would often refer to these investments as ‘dodgy’ investments. I believe that Berkeley Burke knew that clients would often not understand, or read, their execution only letter. Berkeley Burke did not take care of many of their clients and only sought to profit from them, knowing that the outcome was most likely going to be negative for their clients. I’m aware that some clients had called Berkeley Burke asking how they could withdraw money from their bank accounts; these clients were clearly unaware of how their pensions worked and Berkerley Burke should have taken better care.

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