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FSCS tells Sipp misselling victims they don’t need a claims manager

FSCS-Piggy-Bank-500x320.jpgA lawyer has raised concerns that valid claims could be rejected after the Financial Services Compensation Scheme wrote to claimants reminding them they do not need a representative.

Money Marketing has seen a letter from the FSCS to customers of Heritage Pensions, which was appointed as the new operator for Brooklands Trustees in 2016. The lifeboat fund declared Brooklands Trustees in default last week.

The letter tells the customers they might be eligible to claim because Brooklands Trustees did not carry out proper due diligence when it accepted their pension transfer.

The letter details what the FSCS does and how it works. It says: “The service we offer is free and we do not charge individual consumers for dealing with claims. You will be able to apply direct and do not need to use any representative or claims management company to whom fees may be payable from any compensation due to you.”

The gloves are off: FSCS takes the fight to Sipp providers

Lawyer Alasdair Sampson is concerned the FSCS is telling claimants they do not need to use a representative when making their claim. He acknowledges it is correct in telling claimants this, but is worried clients might have their claims rejected because they are not aware of the specific legal issues.

He says: “I have lost count of the number of cases which were either made by the client directly, or by a solicitor who should have known better, and which were refused by FSCS and which were then upheld on review when I submitted further argument supported by documents.”

Sampson adds: “In the case of claims against Sipps, I am concerned that FSCS says that the claimant doesn’t need to use a claims manager or solicitor, which is perfectly correct, but simultaneously omit to make any mention of the particular legal issues and difficulties that can and may arise with claims against SIPPs which the lay claimant will simply not know about and cannot really ever be expected to know about.”

He says: “It strikes me that the FSCS inviting such claims is cosmetic to make them look good – so they can be seen as actively supporting the investing public but all the time knowing that these claims may well be rejected because they have not been prepared, presented and argued correctly.”

The FSCS declared Brooklands Trustees, Stadia Trustees, and Montpelier Pension Administration Services in default last week.

The lifeboat fund has received around 150 claims for compensation relating to the three businesses. Those claims relate to how the businesses set up, operated and administered Sipps through which people invested in storage pods, oil fields, diamonds and overseas property

The FSCS has been contacted for a response.


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

  1. He says: “I have lost count of the number of cases which were either made by the client directly, or by a solicitor who should have known better, and which were refused by FSCS and which were then upheld on review when I submitted further argument supported by documents.”

    If the client is honest about what happened and their claim is rejected then it was because the advice was suitable at the time.

    The fact that a claims company can come along and know what to say to win the claim is shameful and should be stopped.

    Another increase in levies on its way.

  2. The Sipp operators have been happy to draw the fees irrespective of what is in the client’s interest. The scheme I invested in saw members lose circa £ 3.5m whilst the operator trousered circa £ 340k in past fees and continue to ‘earn’ fees of circa £ 40k a year.

    Its is long overdue that these operators are properly held to account.

  3. What we should be looking at is the Solicitors and others raising Capital by way loans to finance their work, and offering unrealistic returns from the eventual compensation paid out. I expect we would not see so many spurious claims being made and should the Complaint be successful, the claimant getting 100% of the compensation, otherwise the same person has still lost out by the % taken, which has to be set at a level to cover all the loans taken out by the law firm. Yes it is true, Law Firms are borrowing money to finance the work and using the claims compensation to repay the loan. Utterly Disgraceful.

  4. Sounds the same as the position if the customer complains to FOS.

  5. Alasdair Sampson 26th January 2018 at 4:02 pm

    Oh dear.

    You really do labour under a misconception.

    Believe it or not, there are very many IFAs out there who don’t know their investment coccyx from their advice humerus – and there are those who are downright dishonest.

    The pages of this and other online journals are thick with articles about “miss-selling scandals” and whole yards of blogs are written by other IFAs berating the bad guys and proclaiming their own innocence.

    If a client makes a complaint directly to the FOS then it will consider the complaint not merely on the basis of what the client says but also taking into account issues that the client cannot possibly know about – the issues of time bar, the application of the UCIS rules, the application of the pension transfer rules etc etc.

    However, not all FOS adjudicators are as knowledgeable about the law and the FCA rules as they should be and they do make mistakes in applying both.

    I have recently had a group of cases rejected by the adjudicator who said they were time barred and his reasoning for that was the application of his own make-believe legal concept that came out of thin air. Fortunately the ombudsman, when presented with argument from me as to what the law and rules actually say, decided otherwise.

    When claims are made to the FSCS, they may make enquiries of other parties for additional documents – for instance, details of notional values of a ceding pension in a transfer claim.

    But other than that, the FSCS will only consider a claim on the basis of the facts and documentary evidence that the claimant actually presents, and their arguments based on that evidence.

    Unlike the FOS, the FSCS will not look beyond what the client presents – and that is because it does not have the same wide discretion as does the FOS.

    If the client has not presented all of the relevant facts or documentary evidence or has not properly argued the law and/or the FCA rules as they apply to the advice process or other financial service, then the FSCS may well reject the claim as it was presented.

    No disrespect to the FSCS, but they really can do no more than that because that is how their rules are drawn up. The FSCS has to apply the law to the facts as presented by the claimant in the same way as would a judge in a court case. They do not have the power to look beyond the confines of the claim.

    Sadly, however, it has to be said that not all FSCS case handlers read all that is put before them or understand all that they do read.

    But the lay client cannot reasonably be expected to know the detail of the law and/or the FCA rules or how they should be applied– God help us, but most of you IFAs are at best only semi-literate when it comes to the law and the FCA rules and how they should be applied – so it would be wholly unreasonable to expect Joe Public to know that.

    The FSCS invites claims against defunct SIPP trustees on the basis that they have not executed “due diligence” whatever that actually means in legal terms. It is not defined anywhere.

    What FSCS has not mentioned in its letter inviting SIPP members to make claims is that there is an additional legal hurdle that the FSCS will have to apply but which the lay client will simply be unable to get over.

    All SIPP Trust Deeds explicitly state that the SIPP trustee does not give suitability advice and that it will not be responsible for the suitability of the investment which lies with the advising IFA.

    Every SIPP trust deed also contains a general “exculpation clause” which says, in effect, that no matter how indolent, ignorant of the law, careless, incompetent or downright negligent a SIPP trustee is in the performance of its duties the SIPP member can have no claim against it except where the actions of the SIPP trustee amount to “deliberate bad faith”.

    Trying to describe and to prove “deliberate bad faith” in legal terms is very difficult – but you certainly know it when you see it.

    The FSCS, like the Pension Ombudsman, has to apply the law to the terms of the contractual documents in exactly the same way as does the judge in a court action. In the case reports that I have seen, the Pension Ombudsman invariably decides in favour of the SIPP trustee on the basis that the actions of the trustee, whilst perhaps causing in whole or in part the investment loss sustained by the SIPP member, do not amount to “deliberate bad faith”.

    It is enough in many if not most complaints to FOS or claims to FSCS that the client is honest in the description of what happened in order to win and de awarded redress/compensation – but not always.

    In cases where the investment is complex, or where the set-up such as a SIPP has legal complexities, or in cases where the defending IFA is a downright cheat or liar – and plenty of you are – then the client simply being honest is not enough to win.

    Along comes a solicitor or a claims company, like me, who actually knows how the investment was supposed to work, or who knows how the law and/or the rules were supposed to have been applied in the advice process, or who knows how to demonstrate that the IFA is a two faced liar – then, yes, I do know what to say and how to say it.

    • The article talks about SIPPS and the FSCS.

      Then the lawyer quoted in subsequent correspondence talks about IFAs and FOS.

      SIPPS and FSCS, maybe – that is not an area in which I normally deal. However, the FSCS will only work on strict liability – and must apply sections 14A and 14B of the Limitation Act 2000.

      If the product is unsuitable than it should be the adviser who takes responsibility.

      If it is an IFA who facilitated an insistent client who then turnsout to be “a downright cheat or liar” then more fool the adviser if they accepted the business without making sure they could defend the complaint later.

      As I have said before, and adviser accepting business on an execution only basis should assume that means there will be no fair hearing before they are lined up against a wall and shot.

  6. Alasdair Sampson 26th January 2018 at 4:32 pm

    My comment was directed to “Justin Side” – whoever he or she is.

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