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FSA: Sipp operators risk causing ‘significant consumer detriment’

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The FSA says Sipp operators risk causing “significant consumer detriment” through a “failure to adequately control their business”.

The regulator has today published the results of a thematic review into the Sipp market.

As a result of the review’s findings, the FSA will launch a programme of work designed to strengthen capital requirements, disclosure and inflation-adjusted projections for Sipps.

It says: “Poor firm compliance with regulatory requirements, particularly in the area of risk planning and mitigation, has significantly increased the risk posed by Sipp operators.

“In addition to generally poor systems and controls, the majority of Sipp operators we visited were unable to articulate the application of Client Money & Assets rules to their business structure.

“We also found inadequate controls over the investments held within some Sipps.

“Together these findings make it clear that Sipp operators have the potential to lead to significant consumer detriment through a failure to adequately control their business.”


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. Scott Taylor-Barr 23rd October 2012 at 3:42 pm

    About time too – I saw one case where the SIPP provider denied having £100,000 of cash on deposit in the clients name for the previous 6 years. When they finally found the money (from documents provided from the client) they charged 6 years worth of “under charged managment fees” and a further fee for “investigation work” in finding the money – before applying back interest at the wrong rate!?!

  2. Name and shame please FSA so IFA’s can be aware of those with poor practices

  3. As always the minority are the problem.
    Dare I say Trustee responsibility.
    Old fashion but it kind of worked.
    Also Due Diligence great way of checking a SIPP provider or any provider.
    32 years in this business has taught me, check and check and check again.

  4. @ Anonymous | 23 Oct 2012 3:42 pm

    It took 6 years for the client to notice they were missing £100,000?

    Did they not receive annual statements or receive an annual review from their IFA?

    That aside – that is shocking behavior by the provider – gives the good ones (and there are many) a bad name.

  5. I think the FSA should pass their findings to HMRC.

    Thousands of small value SIPPs have been used to provide a deposit for investment in overseas resorts.

    The member then sources the balance of the purchase from an external source.

    By using the SIPP to fund the deposit the SIPP has in effect provided a mortgage to the member which is illegal.

    The HMRC should ask all providers who have accepted single asset SIPPs to state whether or not the SIPP has provided the deposit for a resort investment.

    If found to be so the HMRC should levy taxable property charges and depending on the numbers look closely at whether the SIPP provider was complicit.

  6. @ Anonymous | 24 Oct 2012 8:56 am

    If you genuinely believe this has happened you should be reporting this to HMRC anti-fraud unit and not relying on FSA to do it!

  7. @ Anon… 8.56

    Could not agree more. A nightmare in the making!

    Not just this, how many of these investments will fail?

    In other words, how many will never get to completion? How many will not generate sufficient rental income to service the loan? How many SIPPS will go bust?

  8. Does the term ‘Self Investment’ not mean anything – caveat emptor folks!

    Greed drives a lot of these investments through SIPPs – and when they go wrong everyone else is to blame.

  9. As I’ve asked before, just how many of these off-piste investments apparently commonly recommended via via SIPP’s have:-

    1. established (out-)performance track records,

    2. solid capital backing and

    3. are actually worth the added levels of risk they pose?

    How many investors would actually go for them if they were (made) fully aware of and properly understood all these issues? Not that many, I’d warrant. Remember the three laws:-

    1. All booms lead ultimately to bust,

    2. There are certain immutable laws of economic gravity that can be defied only for a finite period and

    3. If it looks too good to be true………

  10. The FSA and its predecessors have been around since 1988. Companed with 1987:

    1 very few people save now
    2 life insurance sales are down
    3 consumers have little trust in financial services.

    Is it the FSA which causes considerable consumer detriment?

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