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FSCS pays out £13m for four Sipp advice firms

The Financial Services Compensation Scheme has paid out almost £13m in compensation claims against four failed Sipp advice firms, Money Marketing can reveal.

The FSCS declared TailorMade Independent, 1 Stop Financial Services, Kynaston-Carnoustie Financial Consultancy and Crawford Scott in default in July following Sipp transfer claims against them.

The FSCS says it has received 450 claims against 1 Stop and paid £7m in compensation. It has received 362 claims against TailorMade and paid £5m in compensation.

It has also received 53 claims against Crawford Scott totalling £500,000, and 37 claims against Kynaston-Carnoustie totalling £450,000.

The FSCS has issued repeated warnings over the rising number of Sipp claims, and last month hit life and pensions intermediaries with a £20m interim levy.

The lifeboat scheme said the primary driver for the interim levy is its recent decision to start paying compensation for losses in the value of investments held in Sipps, as part of advice claims over Sipp transfers.

The FCA banned 1 Stop partners Andrew Rees and Timothy Hughes and fined them £490,100 in April 2014. They were ordered to pay their penalty to the FSCS in the first instance of a fine being paid to the lifeboat scheme.

1 Stop advised nearly 2,000 customers between October 2010 and November 2012 to transfer into Sipps and invest in diamonds and overseas property.

In March the regulator banned and fined former TailorMade directors Lloyd Pope and Peter Legerton.

Between 2010 and 2013, the firm advised 1,600 customers to invest £112m in unregulated investments via Sipps.

More than half of the firm’s customers invested in overseas property operated by the Harlequin group of companies, which is under investigation by the Serious Fraud Office.

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Comments

There are 8 comments at the moment, we would love to hear your opinion too.

  1. jonathan gamlin 2nd April 2015 at 10:28 am

    Same old story same poor regulation , pensions should be for regulated products only , if these unregulated products are so good then go and get them approved as suitable and allow a regulated regime to oversee them . Until this happens more will follow and God help the unwary from April 6th

  2. How disgraceful!…. Tailormade independent still authorised and 2 of the main directors who were responsible for promoting alternative investments are still showing as “active” inside the company.

    It looks like the blame has been shoved onto the CF30 advisers who worked for them but as CF1’s they get away with it? – like they didn’t know what was going on?….

  3. And what is so disturbing is that these firms were making these sales when it was clear there were issues and yet despite often being advised by concerned other regulated entities, the FCA was slow to act (if at all) and so the losses became inevitable – and then the law-abiding industry has to pick-up the tab.

    We see the same with the present unsolicited calls for pensions let alone other forms of ‘advice’ – slow action when much damage has already been caused and not even thinking of the colossal intrusion into people’s lives. The firms pedaling this stuff could be closed-down immediately with a threat of regulatory action (as they are in breach of the rules regarding financial products anyway) yet they don’t act.

    Of course too there are things like boiler rooms where action was years too late and think about the thousands defrauded meantime, many sent to early graves because effective action was not taken at earliest opportunity – it wasn’t difficult.

    Then there remain wonderful investment opportunities for people from invoice discounting, stamps, car-parking lots, university accommodation, guaranteed rental holiday lodges… and so it goes on – any action? No sir, we don’t regulate those till it’s too late and lots of people have lost millions.

    It is funny as I could swear the regulator is there to act to protect the public and to help maintain an orderly market… or have I missed something?

  4. How these firms can be described as “advice firms” is an absolute travesty. They were no more than bucket shops and their activities were appalling with responsible advisers now expected to cover the cost. Shameful.

  5. Yet again another bill for regulatory failings.

    How long do we have to keep shouting that the FSCS should ONLY cover regulated products. If an investment within a SIPP is not regulated, even if advised by a regulated adviser, its should not be covered.

    How long are advisers and their clients suppose to accept this unfair additional levy? As I have stated this will continue as their is no emergency on behalf of the FCA or the FSCS to close this unjust loop whole. For the life of me I cannot understand why these advisers recommend these unregulated investments. I can only assume these were arranged before RDR and commission was a factor. Even then they clearly did not have thoughts of a long career within financial services.

    This is very much a consequence of our industry not having one body, being fragmented with a number of individual bodies representing us. There should be an overall body such like Law Society. Currently we have no defense and no way to appose any unjust rulings.

  6. good day for golf 2nd April 2015 at 1:25 pm

    They were averaging 3 pension transfers a day wtf!!
    Selling investments in diamonds and Cape Verde
    I need my head examining – I sell low cost managed investments in investment trusts – what a turkey

  7. The SIPP trustees should not have accepted them as suitable investments either.

  8. I still don’t understand why unregulated investments are still permitted at all. Also, given (as I understand it) that it’s a criminal offence to act as an adviser without appropriate PII, arranging investments that aren’t covered by one’s PII is surely pretty much the same offence? What were these firms thinking? From that, logic suggests that for the FSCS to force the rest of the authorised and regulated intermediary community, virtually none of whom have ever touched unregulated investments, to pay for the consequences of firms who’ve arranged investments into funds or products not covered by their PII is, at the very least, a travesty of justice.

    And, whilst on the subject of legality, why has no one challenged the FSCS on the legality of having assumed responsibility for failed unregulated investments? They never used to be covered by the FSCS so at whose behest and when did this change? Why was there no consultation? Why isn’t this on APFA’s agenda?

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