FCA probes Sipp providers for data in wake of Dear CEO letter

The FCA has written a letter to Sipp providers asking them to give information about their business activity by Thursday, Money Marketing can reveal.

This data request followed the watchdog’s Dear CEO letter sent to Sipp operators last week to draw attention to High Court claims against Sipp providers Berkeley Burke and Carey Pensions.

This letter outlines its expectations of Sipp providers in relation to their due diligence obligations when accepting investments.

On the same day as this letter was sent the High Court published a landmark ruling where Berkeley Burke lost its case against the Financial Ombudsman Service which it is currently appealing.

The questions

The data request letter obtained by Money Marketing asks Sipp providers to give details about their professional indemnity insurance cover such as who provides the cover.

It also wants details about any excesses, exclusions and limits applicable to the cover and any notifications Sipp providers have made to insurers.

Regarding their financial position the FCA wants to know if firms have sufficient capital to meet regulatory and other financial obligations now, and for the foreseeable future.

Furthermore the FCA asks if firms sought professional advice regarding solvency or viability of the business in the last six months.

The watchdog asks for board minutes relating to any discussion of winding down planning and the solvency of firms.

It also asks providers if they have been in any discussion with other firms regarding a potential sale or acquisition in the last 12 months.

The regulator also wants firms to provide data for the volume of complaints that have been referred to the FOS in the past 12 months that relate to Sipp investments.

FCA visits

Aside from the data request Money Marketing has also learned the watchdog has contacted some firms to arrange visits to them in the near future.

Dentons director of technical services Martin Tilley says: “I can confirm I have heard the rumours the FCA has been approaching firms to visit them after it sent the [Dear CEO] letter.

“To my knowledge we have not been approached yet but it is prudent for Sipp providers to plan for the worst potential outcome of the case involving Berkeley Burke which is the ruling is upheld.

“This ruling has opened up but not answered the question of what an appropriate level of due diligence for Sipp providers is when vetting investments.

“This can only be answered by Sipp providers checking each non-standard investment and due diligence around that investment. This could take hundreds of hours.”



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 […]

Berkeley Burke judicial review set for autumn hearing

A judicial review into a Financial Ombudsman Service determination that will have wide implications for Sipp providers is due to be heard in London this autumn, Money Marketing can reveal. The case concerns a longstanding dispute between Berkeley Burke Sipp Administration and the FOS. In 2014, the FOS ruled against Berkeley Burke for failing to […]

Carey Pensions up for sale as losses grow

Carey Pensions has put itself up for sale as it reports losses for the second year in a row. According to its annual accounts published last week losses have risen due to a number of legal cases relating to some historic business that is now being wound down. In 2016 the embattled Sipp provider recorded […]


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. The regulator should licence all investment providers and their products that can be purchased by a retail client. Simple solution to this problem, but unfortunately the regulator does not wish to take control of the situation.

    • For the FCA to licence (approve) the vast array of products out there would be an impossibly huge and resource-hungry task, not just initially but on an ongoing basis. Apart from anything else, if an FCA-licenced/approved product were to fail as a result of some flaw that it had failed to identify, all fingers would point towards the FCA, a situation that it would NEVER risk happening.

  2. This is frankly laughable, I hope they have greater success with honesty. Speaking for myself there appears to be a vast distance between admission and facts despite the presentation of clearly evidenced documentation

  3. And when they have all been killed off?

  4. “Sipp providers checking each non-standard investment and due diligence around that investment”? So many of them wouldn’t even be able to identify all their NSIs.

    It’s the “readily realisable within 30 days” bit of the NSI test that will catch operators out. I hate to say it, but the FCA seem to have been thinking ahead about this risk nearly two years ago:

    “* How marketable are the securities? In the absence of … market makers … is there a guarantee that securities can be sold at a particular price – or any price?

    * If your holding of a particular security represents a material proportion of the issuance, will that have an impact on realisability?

    * What are the implications of external events prompting many holders of a thinly-traded security all attempting to sell into the market at the same time? How likely is this to occur?”


    • If a SIPP provider goes bust, why would the asset need to be sold? It would most likely be transferred to the new provider who takes over the book of business. When the FCA say ‘capable of being realised within 30 days’ they do mean sell, however when would such a scenario need to take place?

      • The whole point about the NSI definition is that it’s nothing to do with advising, but rather it’s about a SIPP operator’s capital adequacy.

        NSIs are likely to pose a number of challenges in the event of an operator’s failure, so the operator needs to keep more resources in reserve against that doomsday scenario if they hold that sort of asset.

        For an example that’s playing out right now, look at Beaufort Securities’ insolvency.

  5. Surely the whole point of a SIPP is that the customer selects their own investments.

    If the SIPP Provider vets and can reject the invest choices made by the customer, then is it still Self Invested.

    • I think the FCA’s position (with which, I have to say, I don’t disagree), is that SIPP providers have at least some measure of responsibility for preventing direct investors from buying into in flaky junk that hardly any are qualified to assess for themselves. Check out the list of investments permitted via James Hay’s SIPP which appears to be a model of compliance with FCA guidelines.

  6. It’s been in the rules since 2009 that an appropriateness test applies to non-standard assets and retail customers (CESR Nov 2009, GC14/3), why did BB think they had a legal leg to stand on?

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