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FOS orders compensation over Harlequin pension transfer

The Financial Ombudsman Service has ordered IFA firm Sussex Independent Financial Advisers to compensate a client for advising them to transfer their pension into a Sipp set up to invest in Harlequin.

The decision concerns a client referred to as Mrs S, who complained about the advice she received in 2009 to move her pension to a Sipp with Firm G.

This Sipp was set up to allow Mrs S to invest in Harlequin, an unregulated investment scheme that involving off-plan hotel developments in the Caribbean.

Mrs S was made aware of the opportunity to invest in Harlequin by a third party who referred Mrs S to Sussex so her pension could be used to make an investment in Harlequin.

Mrs S put £83,000 into the Sipp alongside ad hoc lump pension contributions of just over £10,000 after Sussex recommended Firm G as a Sipp provider.

A sum of £91,500 became invested in Harlequin, which then encountered difficulties.

Mrs S realised she was likely to lose most, if not all, of the money she had invested in Harlequin via the Sipp with Firm G and complained to Sussex about the advice she was given to take out the Sipp.

Sussex did not uphold the complaint and Mrs S asked the FOS to review the matter.

Two FOS adjudicators found Sussex had a duty not just to consider the suitability of the Sipp but also how it was going to be invested; Mrs S was an inexperienced investor close to retirement age and Harlequin was a high-risk unregulated investment.

They also said Mrs S was only prepared to take a balanced or medium level of risk and this was not reflected by investing most of her Sipp in Harlequin.

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Sussex did not agree with the adjudicators and argued Mrs S had already made the decision to invest in Harlequin on the advice of the third party while she had other pension assets and a share in an investment property.

Sussex also cited the fact Mrs S transferred to the third party for ongoing advice in 2012 and did not contact Sussex again indicates the third party was her real adviser.

In terms of the investment risk Sussex explicitly told Mrs S it was not giving advice on the Harlequin investment and at the time there was no indication the Harlequin investment would lose money.

In upholding the complaint the FOS adjudicator wrote: “I agree that Sussex gave Mrs S advice. That Mrs S may also have been advised by another party prior to approaching Sussex is not relevant. Her complaint is about advice from Sussex. I am persuaded by the evidence, notably the recommendation letter, fact find and attitude to risk discussions, Sussex acted in an advisory capacity.”

To calculate the compensation for Mrs S, FOS said Sussex should compare the value of Mrs S’s pension if she had not transferred with the current value of her Sipp.

In addition, Sussex should pay five years’ worth of future fees owed by Mrs S to the Sipp and £250 for the trouble caused by the unsuitable advice.

Money Marketing has previously reported on a number of FSCS decisions that have awarded compensation over bad advice surrounding Harlequin.



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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Even if Sussex didn’t give advice on this investment (though the weight of evidence suggests that it did), the lessons are clear ~ NEVER facilitate or arrange ANYTHING recommended by another party, particularly an unregulated one. And don’t use a SIPP provider which might allow your client to make off-piste investments behind your back, because you can be held responsible merely for having recommended a SIPP that enabled him/her to do so, even though you may have had no direct hand in it. Most people don’t need a SIPP anyway.

  2. As with so many of these cases, it looks as if an unregulated “adviser” had the ear of the client, such that it wouldn’t really have mattered what the adviser said as to the transfer advice.

    But hey. Many IFAs in those parts of East Sussex (& Kent) know this firm, and know its arrogant egotistical boss. If you lose a client to these people, he is wont to manufacture a complaint on their behalf against you. Indeed, I have seen cases where he complained about the very same thing that in this instance he refused to uphold.

    So for once, well done Ombudsman Terry Connor. Hopefully the claims chasers have the mailing list and there will be a fair few more of these cases against Sussex So-called Independent.

  3. Its IFA’s like this that should be eradicated by the FCA, the FOS is completely right, there are to many IFA’s!! taking the Fees but try to obfuscate the accountability, Terminate their Regulation without the right of appeal, this has a fundamental impact of all of our PI figures,

  4. Looks pretty clear cut and correct decision to me. Can be read here for those interested.

  5. I read that she was a Balanced investor, investing £91K.

    Then I read that the investment was regulated, with the potential to generate income of £20K PA.

    By now I was getting nervous.

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