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FCA raises client money concerns in final Sipp guidance

The FCA has published final guidance for Sipp operators on meeting their regulatory requirements and raised concerns about a lack of knowledge among providers of its client money and custody asset rules.

The guidance sets out what Sipp providers should do in order to avoiding falling foul of the regulator’s rules.

The regulator raises concerns over providers’ knowledge of its client money and custody asset rules, with the majority unable to accurately explain how they apply to their business.

The FCA says: “Following supervisory work, we are concerned that the majority of Sipp operators may be unable to accurately explain the application of the client money and custody asset rules to their businesses, where relevant. 

“This matters as this could cause significant detriment to clients were a Sipp operator to fail, for example through loss and/or cost to clients’ pensions

“All firms should ensure that senior management understand the application of the CASS rules to their business, and where they are unsure, to seek appropriate advice.”

Suffolk Life head of marketing and proposition Greg Kingston says: “The FCA is clearly heavily focused on client money. This is a reminder of how Sipp operators are required to do business ahead of the publication of the new capital adequacy rules.”

The FCA’s guidance places a heavy emphasis on systems and controls, urging Sipp firms to ensure they have clear procedures in place to monitor and minimise potential risks.

The regulator also expects Sipp operators to be able to gather and analyse management information in order to identify possible instances of financial crime and consumer detriment. 

In addition, the FCA says firms should periodically review the due diligence processes they have in place to monitor advisers and investments.

While the FCA acknowledges that members’ advisers are responsible for any Sipp investment advice given, it says Sipp providers must accept responsibility for the quality of business they administer.

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