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FCA evidence throws Sipp provider court case into doubt

Royal Court of Justice High Court 480The FCA has asked if it can submit a new legal argument as Sipp provider Berkeley Burke continues its pivotal legal challenge to a Financial Ombudsman Service ruling against it.

The FCA provided evidence in the case, acting as interested party to the judicial review, as it could inform the future appoach from regulators over what responsibility Sipp provides should have for investment failures.

In 2014, the FOS ruled 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.

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

Legal representatives of both the claimant Berkeley Burke and the defendant FOS based their skeleton arguments on the idea that the FCA’s COBS rule 11.2.19 applies to unregulated investments like the one Mr Charlton invested in.

The rule states that “whenever there is a specific instruction from the client, the firm must execute the order following the specific instruction.”

But QC Andrew Henshaw told Judge Jacobs this morning at the start of the proceedings that the rule does not in fact apply to unregulated investments but regulated ones such as shares and bonds.

The FCA said it wished to introduce a new legal argument which was not covered in its detailed grounds of resistance or its skeleton argument.

Responding to this intervention QC Jonathan Kirk, representing Berkeley Burke, said: “We have been taken by surprise that this duty does not apply in this case and the regulator does not seem to understand when its own rules apply.

“We are unhappy at having to consider this important issue on the hoof and to achieve fairness we would like to time to consider this matter.”

Judge Jacobs has yet to decide if this point will be dealt with by the end of tomorrow when the judicial review is meant to end, or an extension has to be granted.

QC James Strachan, who is representing the FOS, says he believes the matter can be dealt with in the time available and an extension will not be necessary.

Yesterday legal representatives for Berkeley Burke claimed FOS misapplied the law to the Sipp provider.

The judicial review could establish with greater certainty whether Sipp providers have a duty of care to vet unregulated investments for their clients.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Highlights how complex, arcane and difficult to understand the rulebook is.

    Surely it is time that the FCA took a crash course in Plain English and looked to amend the rules and ‘guidance’.

  2. The SIPP provider is responsible for administering the legal framework of the plan. Unless they offer specific investment services, SIPP providers should not be held responsible for clients’ silly investment decisions.

  3. It seems to me that after all this time, the FCA has ambushed BB by turning on it’s head what both FOS and BB thought the FCA actually meant in COBs 11.2.19 . Personally I’d like t see the judge critiize the FCA for allowing FOS and BB to waste their time and money and the courts times over a rule that it appears that until last night, the writers of the rule didn’t understand themselves.
    So much for the regulator requiring us to be clear, fair and NOT misleading.
    Perhaps they should be setting the tone from the top by example rather than telling us to do what they appear totally incapabale of doing themselves!

    • If we’re going to bandy rule references around, check out COBS 11.1.1 R. At the beginning of 2011, this read:

      “This sourcebook applies to a firm with respect to the following activities carried on from an establishment maintained by it, or its appointed representative, in the United Kingdom:

      (2) designated investment business;
      (3) long-term insurance business in relation to life policies;
      and activities connected with them.”

      Which seems pretty clear to me.

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