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FCA clarifies Sipp standard assets cap-ad stance

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The FCA has given further clarity on which Sipp assets can be considered standard and non-standard, including commercial property and discretionary fund management portfolios.

New capital adequacy rules due to take effect from September 2016 base solvency requirements on the proportion of standard and non-standard assets held by Sipp providers.

Following consultation the regulator watered down its original proposal to class all commercial property as non-standard in 2014. But firms have asked for more clarity.

In a handbook update published today the regulator says: “When determining whether an asset is capable of being readily realised within 30 days, a firm should consider whether the transaction can be concluded within that time limit in the ordinary course of business. For example, such a date can be the date of exchange of contracts or any other date when both parties have unconditionally agreed to undertake their contractual obligations to realise the asset.

“The count of 30 days starts and ends on the dates when the transaction is initiated and concluded, respectively.”

The FCA adds it will not be clarifying its position on commercial property any further.

In addition, the regulator confirmed DFM portfolios should be considered standard “when the Sipp operator has arrangements in place to ensure that the portfolio comprises standard assets only”.

Some providers proposed adding crowdfunding and peer-to-peer assets to the list of standard assets.

However, the FCA says there is not “convincing evidence that these markets will generally have the necessary characteristics that standard assets have for this specific policy purpose”.

Talbot and Muir head of pensions technical Claire Trott says: “The response to the most recent consultation on the capital adequacy requirements for Sipp operators clarifies a number of points in particular around commercial property, making it clearer what is meant by being capable of being sold. This continues to strengthen our view that commercial property is, in most cases, a standard asset.

Suffolk Life head of communications and insight Greg Kingston says: “If the reason that the original capital requirements outlined in CP12/33 have been so watered down because the regulator has gained an improved view and understanding of the Sipp market then that’s a good thing.

“My sense is that there’s little energy to challenge or question further, and Sipp firms should now implement as required and prepare for a post implementation review by the regulator in the next 24 months.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. 30 days to exchange a property?

  2. If all commercial property can sell at auction, creating a contract at the end of the auction process, does that mean all property too?

  3. Mark Hayes-Newington 7th December 2015 at 4:18 pm

    I am not a property lawyer, but it strikes me that there is a simple answer. The FCA says “The count of 30 days starts and ends on the dates when the transaction is initiated and concluded, respectively.” Could it not be argued that transaction is in fact not “initiated” until there is an exchange of contracts defining the transaction and its terms thus it is only Completion which must be in 30 days?

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