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FOS upholds four Harlequin complaints against advice firms

The Financial Ombudsman Service has upheld four complaints regarding Harlequin investments against advice firms since the beginning of the year.

The Harlequin group of companies marketed and built overseas luxury property developments, and is under investigation by the Serious Fraud Office.

In a decision against West Sussed-based IFA Regency Financial Resources, the FOS ruled the firm failed to consider the suitability of the investment when advising on a Sipp.

The firm, which is no longer authorised as of January according to the FCA register, advised the client to transfer £56,700 from three pension policies into a Sipp. The client was introduced to the Harlequin property investment by a third party, which introduced him to Regency to find a suitable Sipp provider.

The FOS has ordered Regency should pay the difference between the value of the Sipp and the value the pensions would have held had they not been transferred, plus £300 for distress and inconvenience.

The FOS has also upheld two decisions against Kingswood Financial Advisors.

Both relate to clients who invested their entire pension in Harlequin through a Sipp.

In both cases, the FOS found the firm failed to consider the suitability of the underlying investment. Kingswood must pay the difference between the value of the Sipp and the value the clients’ pensions would have held, plus £1,000 each.

The FOS also upheld a complaint against Kent-based advice firm C.I.B. Life & Pensions relating to a client who invested in Harlequin.

The client attended a presentation where C.I.B. and Harlequin were both speaking. She subsequently contacted C.I.B. expressing an interest in investing in Harlequin, and was sent a direct offer pack which explained the firm was not making any recommendations regarding suitability.

The client returned the relevant forms and invested £45,000 in Harlequin via a Sipp.

But the FOS found C.I.B incorrectly classified the customer as a professional client and did not give sufficient risk warnings about the investment.

It has ordered C.I.B to pay the difference between the value of the Sipp and the value the client’s existing pensions would have held, plus £300 for distress.

Last month, the FCA banned two former directors of advice firm TailorMade Independent, which advised over half of its clients to invest in overseas property operated by Harlequin. The firm advised 1,661 customers to invest over £110m in unregulated investments.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. What I want to see is a public enquiry into the FSA’s response to Harlequin as it is clear to me that the FCA ignored concerns by financial advisers as early as 2008 and their repeated concerns through to 2013 when FSA eventually sent out a warning notice. I even have emails from the unauthorised business team stating that the FSA cannot take action as Harlequin is not an authorised firm and does not fall under the FSA jurisdiction!

    The fact is the FSA at the time had a total disregard of authorisation rules and was allowing Harlequin to directly market towards pension customers without any authorisation even as they were trying to make out that their investments were covered by FSCS which they were not.

    The firms and individuals who are directly involved in this should also face prosecution as they knew that the investment was an unregulated product and many of them knew that he wasn’t suited to their clients they were just chasing commission.

  2. Now, I hate Harlequin as much as the next man (probably more, in fact), but I don’t see what regulated activity they may allegedly have been undertaking that leads Peter Herd to be so incredulous about the FSA’s view of their jurisdictional reach. Essentially, as I see it, they are (were) estate agents.

  3. “The client was introduced to the Harlequin property investment by a third party, which introduced him to Regency to find a suitable Sipp provider.”

    So the individual had already decided he wanted to use their pension fund to invest in Harlequin without any regulated advice and was introduced to a financial adviser to set up a SIPP to facilitate self investment.

    As a result we have two unregulated parties, one being investigated by the SFO, involved in the ‘sale’ of the investment but it is the regulated industry that will pick up the tab – scandalous.

    And despite this we still constantly see adverts in the papers for ‘property investments’ with guaranteed returns of 8% p.a. but the FCA seems to turn a blind eye.

  4. Despite what you think on the Harlequin debate, recommending a SIPP only and not taking responsibility for the underlying investment, means advisers are exposed to suitability risk. The regulator has been clear on this in past publications and these FOS decisions appear broadly consistent with the FCA.

  5. Adam le Smith

    The fact is that Harlequin were not acting just as estate agents, many of the agents and representatives deliberately targeted people with pension funds giving chapter and verse on how to use SIPPs to purchase property. The fact is many of these were holding seminars and relaying information to potential customers without any authorised financial adviser. This is a clear breach of authorisation rules and Harlequin’s own website even had how to use a SIPP information page.

    Although any potential customers were introduced to financial advisers to set up a SIPP transaction and those advisers should have carried out their due diligence, the fact is that Harlequin representatives were deliberately targeting pension funds.

    This is yet another example of how the FSA and now FCA are failing to enforce authorisation rules. The regulator also needs to bring in clearer sanctions against advisers who do occasionally break the rules. The fact is Harlequin should have never happened if the FSA had enforced authorisation rules preventing Harlequin from marketing towards pensions and if advisers had done their due diligence on their investment rather than trying to set up a SIPP and wiping their hands from any investment content.

  6. Oh come on! Who is daft enough to invest in these offshore schemes. From time immemorial there has always been questions – from time share to holiday lets. The advisers at best were very stupid. I suspect worse. The clients completely brainless – if you do want to invest in a foreign property go to a decent UK lawyer who has experience in operating in that field and buy outright and directly.

    The regulator is there to protect the public – or so it tells us. So it should at the very least prevent advisers from dealing with suspect firms at the outset – not after the damage has been done.

    One wonders what the SIPP trustees were doing. Perhaps they too should be hauled over the coals?

  7. I invested in harlequin through the advice of a financial advisor i had a final salary pension I took their advice and they sorted it all out for me. If I need legal advice iwould seek to speak to a solicitor. I had advice from a financial advisor

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