Upholding a Financial Ombudsman Service ruling against a Sipp provider over due diligence failures would not create new requirements for the market as a whole, a judicial review into the decision has head.
A court is currently hearing arguments as Berkeley Burke challenges a ruling that it, as a Sipp provider, could be held responsible for investment failures.
In 2011 a client, known as Mr Charlton, invested his money into plots of agricultural land in Cambodia via a Berkeley Burke Sipp.
In 2014, the FOS ruled against Berkeley Burke for failing to carry out adequate due diligence on the £29,000 unregulated collective investment scheme.
QC James Strachan, who is representing the FOS, the defendant in the case, told the court today that asking a Sipp provider to check an investment in a foreign country is simply an application of existing due diligence requirements.
QC Jonathan Kirk, representing Berkeley Burke, had earlier said in his submission to the court that FOS has stretched the requirements of due diligence in its ruling in the case.
Kirk argued FOS has created a new duty of due diligence in its ruling on Berkeley Burke that would have widespread repercussions for the Sipp industry depending on the outcome of the judicial review.
But Strachan in his closing argument pointed out recasting FOS’s ruling as a misapplication of law is wrong, as the concept of due diligence already includes the kind of inquiry it claims Berkeley Burke should have conducted.
He said: “The legal representatives of Berkeley Burke do not like the width of the ruling, [but] the duties on due diligence were defined before the case [in guidance such as the FSA’s thematic review on Sipp providers].
“The FOS concluded there was a duty to look beyond mere ‘Sippability’ [in the case of Mr Charlton] and at the type of investment being proposed.
“These duties take their importance from the circumstances and if you as a Sipp provider are dealing with an unsophisticated investor then that shapes the level of due diligence needed to treat the customer fairly compared to a sophisticated investor.”