Sipp operators have no proven responsibility to conduct due diligence on investments, a trade body has said, as it warns the Financial Services Compensation Scheme is taking the wrong approach by making them foot the bill for redress claims.
The Association of Member-Directed Pension Schemes has written to the lifeboat fund on the back of its annual plan and budget last week in the which the FSCS says it will begin accepting claims against a number of Sipp operators for failing to look closely enough at the underlying investments held by them.
AMPS says it is aware of a Sipp operator launching a judicial review against a Financial Ombudsman Service decision that claimed it bore due diligence responsibility, the outcome of which could hit other Sipp operators and be influenced by the FSCS’ statements on the market.
AMPS chairman Zachary Gallagher says: “The FSCS would seem to be premature in its presumption that a Sipp operator was responsible in law for ‘due diligence’ on investments chosen by Sipp members, at a time likely to be material in actions resulting in claims seemingly accepted by FSCS.
“The AMPS Committee is concerned that the FSCS risks going far beyond its function of acting as fund of last resort. Likely implications could be increased risk of Sipp operator failure, as operators face the cost of defending claims seemingly encouraged by the FSCS’s action; and an effective transfer to the wider industry of responsibility for prospective losses on investments for which Sipp operators had no regulatory authority to advise in favour of or against, and no proven responsibility for ‘due diligence’.”