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IFA firm future in doubt after FOS upholds Harlequin investment complaint


A Kent-based advice firm is questioning its future after a complaint to the Financial Ombudsman Service related to a Harlequin property investment was upheld against it.

The decision, published by the FOS in September, relates to a client who was advised by Foreman Financial Services, trading as GraingerCo Financial Services, to transfer his pension to a Sipp.

He then used the Sipp to invest in an off-plan Harlequin property.

Money Marketing understands the decision has threatened the future of the business after it estimated the total compensation cost will be around £100,000.

The FOS decision says the complainant, Mr S, was the client of another adviser who introduced him to the Harlequin investment when they went to a presentation together. Mr S decided to invest in the Harlequin property, but as the adviser was not authorised to advise on pensions the complainant was referred to Foreman to arrange the Sipp.

In July 2011, Foreman advised Mr S to transfer his existing pension to a Sipp and Mr S then used the Sipp to buy the property.

Mr S complained Foreman had not assessed the suitability of the Harlequin investment but Foreman rejected that claim because Mr S had received investment advice from the other adviser and Foreman was introduced only for advice on the Sipp.

After investigating the complaint, a FOS adjudicator said Foreman should have considered the suitability of the Harlequin investment and that Mr S should not have been advised to transfer into a Sipp.

This was because Mr S already had seven buy-to-let properties and by transferring his pension into a Sipp and investing in Harlequin he was putting all of his investments into one sector. The adjudicator said this was a high-risk strategy and not suitable for the complainant’s “dynamic” risk profile.

Foreman did not agree with the adjudicator’s findings and the complaint was referred to an ombudsman.

Foreman argued while the firm did not give specific risk warnings about Harlequin, some weight should be given to the fact that another business gave the investment advice.

Foreman also argued the only fair outcome in the case would be to open a complaint against the business that introduced. He added the firm had followed the rules in place at the time.

In his decision, ombudsman Roy Milne says because the original adviser was not authorised to give advice on pensions or investments, their network would not accept any responsibility for advice given about Harlequin.

Milne says Foreman should pay full compensation but that Mr S should give Foreman any rights of action he might have against third parties so Foreman could decide if it wanted to recover any payments from the network.

He says: “Foreman only advised on the Sipp. They argue Mr S had already decided to invest in Harlequin after being advised by another adviser. In my view, the suitability of the transfer needs to be considered in its entirety. The risk involved is about the investment rather than the Sipp. So, to give suitable advice in line with the rules the investment had to be considered.”

The ombudsman also found if Foreman had given suitable advice Mr S could have cancelled his investment but he would have lost the £1,000 reservation fee he had already paid for the Harlequin property.



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There are 29 comments at the moment, we would love to hear your opinion too.

  1. This case highlights the transfer of liability for such joint ventures, it does make sense that if the introducing adviser could not advise on the SIPP, then the whole of the advice has in effect been given by the second adviser.

    Be careful who you get into bed with.

  2. So… Did Foreman advise on a SIPP because of the flexibility of investment choices the client then has from cash to overseas’ property and then the client decided to select the Harlequin investment – or did Foreman suggest a SIPP which was just there ready and waiting to enact the Harlequin investment I wonder… The diversification argument is a bit limp – if the client has 7 BTLs then surely he knew exactly what he was doing, not the innocent investor he now suggests he was, simply because he was stupid enough to entrust a shady and far-fetched scheme like that? However, naively or inadvertently the adviser, for a Judas shilling, has indemnified this property speculator.

  3. “Foreman could decide if it wanted to recover any payments from the network.” What network?

    Did the advising party have proper PII cover for providing advice on Harlequin Property Investments? Bet he didn’t.

    Did it not occur to the FSA to ask? Bet it didn’t.

    Was he required to notify the FSA that he was advising people to put their money into Harlequin Property Investments? Bet he wasn’t.

    Had he done so, would the FSA have done anything about it? Bet they wouldn’t have.

    Is the fall out from this likely to fall on the rest of us by way of the FSCS? Bet it is.

    • Hi Julian, I always enjoy reading your letters. Here, again, you are spot on. There is more to say which, however, I cannot put into writing. I would love to chat, off the record.

  4. No such thing as, at arms length…..

    Avoid introducers at all costs and as for the rules in place at the time…. FOS make the rules as they go along

  5. There are several inconsistencies here. The adviser was able to advise on pensions and investments, an incontrovertible fact ignored by the FOS. His network would not allow their IFA’s to set up SIPPS. At the time Harlequin did not look like a “shady scheme” and, of course, SIPP providers had done the necessary due diligence, hadn’t they? Back in 2011 we all thought that SIPPS were exactly what they said on the tin – self-invested. When did that change? The client would have willingly foregone a £1000 non refundable deposit on my say so? I don’t think so. Let me also say, there is more to this case than meets the eye – a fact well known by FOS.

    • Alasdair Sampson 19th January 2017 at 6:15 pm


      I assume that your PI insurers engaged their solicitors to defend this complaint on your behalf. The terms of the decision do not indicate if you had an agent dealing with FOS on your behalf.

    • History is being re-written by the FOS, the FCA and to some measure, the Press. What the situation was really like in 2011/2012/2013 is being wiped from our memories and a new “lets find out who we can blame” story is being peddled as the “truth”. How far up the ladder at the FCA/FOS does this go i wonder – perhaps further than we can imagine???

    • Im sorry Mr Foreman but greed got the better of you.
      We were approached by introducers around the same time and we didnt go anywhere near.
      It was clear from the outset the Harlequin scheme was a rip-off

  6. hmm… what a mess. Frankly I’m more inclined to believe that the investor was completely aware of what he was doing but was unwilling to take any actual risk and now shifting all the blame to the one element that has the prospect of redress. The Adviser must have been aware what was going on and pretended that the risk was limited to arranging the vehicle. The introducer, probably knew the entire thing was only serving his/her interest. What I still dont understand is why the SIPP provider gets away with no DD either and is the one that actually made this happen in practice. Surely it is time providers did some DD on those that are or have used such dubious “investments”…

    Sadly we are all likely to pay… everyone except the charming investor.

    Sure, its keeping records, but its also about having long-term proper client relationships and not simply being a transactional adviser. Hope is not a process.

  7. We were approached by a firm recently to carry out transfer advice because they weren’t qualified or authorised to do it. After lengthy consideration (about 5 minutes) we declined because this would have been our only involvement. They wanted to then do the investment piece leaving the transfer advice firmly in our court with unending liability whilst they made a packet doing who knows what?

    This case amplifies the folly of dealing on such a basis and call me el thicko; I scratch and scratch my head but cannot understand why firms are still doing it. The fast buck of say a thousand quid has brought this firm down. FSCS levy coming up – aaaarrrggghhh!

  8. Experienced adviser 19th January 2017 at 5:35 pm

    Bonkers. FOR always treat clients like idiots and like to pin things on advisers in as many cases as possible.

    FOSTER should only employ decision makers who have field experience.

  9. Experienced adviser 19th January 2017 at 5:36 pm

    Bonkers. FOS always treat clients like idiots and like to pin things on advisers in as many cases as possible.

    FOS should only employ decision makers who have field experience.

  10. Consider how I feel, I am a mortgage and life broker . What the … has that got to do with a dodgy Sipp adviser ? Oh that’s right I’m put in the same class for fees by the wooden tops down in Canary wharf!!!!!

  11. Whilst I don’t doubt that the actual investor understood what he was getting involved in and there is probably more to this case than we are being told here, the fact we are regulated and professional means we need to view it differently from them and have the ability to say No – especially if it has potential to come back and bite us on the backside. No doubt Foreman’s wish they had done that in this case. However Stephen I must take issue with your comment that Harlequin did not look ‘shady’ in 2011. I was introduced to it before 2011 and thankfully never got involved at all with it purely because that is exactly what it did look.

  12. Is this a good forum to refresh the issues of ‘why the shortage of new advisers’ or ‘why the problem with insistent clients?’.

    I have said my piece on unregulated products but I get the feeling that this adviser has been caught between a rock and a hard place and have great sympathy for his plight and hope that he and his family are not left to foot this bill by themselves… knowing our industry as I do, I don’t see anyone else coming forward though!

  13. Harlequin paid good commission 6%+/-, and what seems to be missing here is who got paid?
    Perhaps there was a back-hander between FFS & the un-named ‘other adviser’?

    • I was not paid any commission whatsoever and our compliance were happy with what was done. I actually visited the Harlequin resort in 2011 (at my own expense) and it was excellent.
      With the assistance of a claims chaser I have been made the scapegoat here.

    • you could get upto 15% on harliquin, it was always going to be dodgy but too many greedy people about.

  14. Too right Steve.
    According to the FOS view of SIPPS, you should all be checking every buy and sell decision under a stock trade account just in case the “self investor” makes a poor choice.

    • Stephen,

      We dont have the benefit of being the adviser, or FoS, to have seen the full version of events, but if put aside the actual facts of the case for one moment, why would one case upheld by FoS, put the future of your company in doubt?

      Can you confirm if you had PI cover and what excess was applicable to this claim.

  15. Whilst I suspect the full facts are not contained in the article, this is an example where investors can put funds at risk with relative impunity give that if they make money, all is well and good, if they don’t they can talk to the local CMC and find a means to recover their losses.

    Whilst there is now clear direction from the FCA that you can’t transfer a pension without advising on the underlying assets it removes any responsibility from others who are party to decisions. For example, what if the adviser recommends to hold cash and the client then decides to deal direct and buy something niche….. what’s to stop the client then accusing the adviser that this was the plan all along?

    It feels that regulated advice is already full of liabilities, when others are behind bad decisions one can only feel sorry for professional advisers who end up on the wrong side of the clients bad judgement.

    In 2017, many advisers are much more aware but going back to the time of this case, such clarity hadn’t been set out.

  16. Makes me think of a call I took from an IFA in 1998/1999.

    Customer met a friend who was in FS and got advice.

    However, friend was not authorised. So he spoke the IFA who processed the sale,(doubtless getting commission).

    Come the PIA review, he then rang his PII, and told them why he was not responsible for the sale.

    Doubt if it had a happy ending for the IFA.

    • What a load of drivvle.

      Why did the IFA call you?
      How do you know he processed the sale and took commission?
      Were you there when he rang his PI, else how do you know he did?
      How do you know what ending it had?

  17. @Stephen Foreman………….thats an interesting set of comments.

    Would you care to put a number on how many SIPP’s your small practice advised on in 2016?
    10,20,50 or 100 even?

    I know the answer, so before you come on here and bleat lets see a wee bit of honesty shall we, as your “SIPP Factory” has been doing some nice business hasn’t it!

  18. Justin Side.

    The network had a PIA visit.

    Result was external contractors reviewing sales deemed to be ‘of concern’.

    The sale was deemed to non compliant, meaning customer then needed to be compensated for the financial.

    As for the rest, he then rang me and told me that this sale, (which was on his books) had not been advised by him.

    He felt it was unfair that he would have to pay and he said he had phoned his PII and told them he was not responsible for the advice and why.

    Given he had claimed the credit for the sale/advice and was now saying this untrue was unlikely to impress his PII provider, especially given that when he processed the sale he knew that the person giving the advice was not authorised.

    I simply thanked him for letting me know.

  19. This sounds like Stephen Foreman has been used as the fall guy by the other adviser. The motto of the story is beware of people bearing gifts i.e. people looking to introduce business to you and always cover your behind.

  20. I doubt that the PI WILL COVER THE LOSS, as it is an unregulated investment and probably excluded from a claim and hence no legal fees will be covered either.
    That means the IFA will probably become insolvent and fall into default with the FSCS.
    PS: sounds to me that a CMC was driving this.
    PPS: FOS and the FCA don’t care!

    • Stephen Foreman 13th March 2017 at 11:10 am

      You are absolutely spot on. Worse than that, however, is that the complainant lied to the FOS in order to secure his judgement. The FOS are aware of this but tell me they cannot do anything about this fraud as I did not tell them about it soon enough! Watch this space.

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