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FSCS warns providers on the hook for Sipp due diligence failures

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The Financial Services Compensation Scheme has warned providers they may have to meet the cost of future claims where they have accepted Sipp business from unauthorised introducers.

In its plan and budget for 2017/18, the FSCS says where claims relate to Sipp due diligence failures, where there is a legal responsibility and if claims are eligible these would fall on the investment provider class.

The document says: “Although we have not made any allowances at this time, the FSCS has received a number of claims against Sipp operators in relation to due diligence failings.

“The FCA has previously highlighted concerns in the Sipp market where operators have accepted business from non-authorised introducers. Should the FSCS be satisfied that a legal liability arises and these claims are eligible, the costs in relation to these claims would come under the investment provision class.”

The FSCS announced earlier today it would be refunding investment advisers £50m, while levying an additional £36m on advisers and the wider industry to pay for poor Sipp advice.

In the plan and budget, FSCS chief executive Mark Neale says the focus for the organisation will be on improving customer service and achieving better value for money. This will include a reduction in headcount by 6 per cent by March 2018, and a review of its outsourcing strategy.

The FSCS’s management expenses levy, to cover the organisation’s running costs, has been proposed at £69.2m for 2017/18, compared with £67.4m this year. The FCA and Prudential Regulation Authority are consulting on this levy.

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