The Financial Ombudsman Service has upheld a complaint against Sipp operator Berkeley Burke Sipp Admin-istration for failing to carry out adequate due diligence on a £29,000 unregulated collective investment scheme.
In 2011 an investor, referred to as Mr A, transferred £29,394 from a personal pension plan into a Sipp through Berkeley Burke after being introduced by an unregulated agent. He invested £24,195 in Sustainable AgroEnergy, an unregulated investment. The firm went into administration and Mr A lost his entire fund.
In a decision published earlier this month, ombudsman Roy Milne upheld the complaint, ruling that Berkeley Burke should have been alert to the fact the investment was potentially unsuitable and should have made further enquiries.
The decision cites an FSA thematic review of Sipp operators in 2009 which listed the following as examples of good practice: confirming the intermediaries that advise clients are regulated and being able to identify anomalous investments and seek appropriate clarification of their suitability.
Berkeley Burke argued it had not advised the investor and as a Sipp operator could not have been aware of the investment’s suitability or otherwise for him.
But Milne says: “Mr A’s investment was introduced by an unregulated intermediary. In my view, Sustainable AgroEnergy was an unusual and esoteric investment. This was a relatively small-value Sipp invested in an unusual and new investment. These factors should all have alerted Berkeley Burke to the fact that this investment and the Sipp were potentially unsuitable.
“Berkeley Burke should have made further enquiries to establish whether the investment was suitable for Mr A.”
The FOS has ordered Berkeley Burke to pay the investor the difference between the value of his investment and the return of the FTSE WMA index over the same period, plus £500 for distress and inconvenience. It says it assumes the investment has no value.
Plan Money director Peter Chadborn says: “There is a large onus on Sipp providers to carry out proper due diligence and do some joined-up thinking. An unusual investment coming from an unregulated source should have set alarm bells ringing.”
Berkeley Burke declined to comment.