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Sipp providers gear up for landmark court action

High-Court-HighCourt-700x450.jpgThe responsibilities of Sipp providers in relation to unregulated investments are set to be clarified in two court cases that could have wide implications for the industry later this month.

The FCA has submitted evidence to both cases about how Sipp providers breached its conduct rules by accepting esoteric investments without due diligence.

The first case is a judicial review into a longstanding dispute between Berkeley Burke Sipp Administration and the Financial Ombudsman Service scheduled to start next week.

Money Marketing previously reported on the case that goes back to 2014 when the FOS ruled against Berkeley Burke for failing to carry out adequate due diligence on a £29,000 unregulated collective investment scheme.

Berkeley Burke took legal action and the FOS agreed to look again at the decision, which was both controversial and unprecedented at the time.

In February 2017, the FOS issued a second determination upholding the original ruling but Berkeley Burke challenged the decision again.

In October 2017 the High Court struck down Berkeley Burke’s challenge and a question remained whether Berkeley Burke would pursue a judicial review to challenge the decision for a third time.

Money Marketing obtained exclusive court documents that provide an insight into the various arguments being deployed for the upcoming trial.

Berkeley Burke’s documents note that if the FOS decision is upheld, then a number of Sipp providers will not only be under the obligation to screen all non-standard investments, but clients may find they are unable to invest in their desired investment.

Subsequently, the fee for arranging a Sipp would have to go up considerably and some providers might not be able to cover these costs.

Elsewhere, Money Marketing understands the ruling in the Carey Pensions case is expected to be published in a couple of weeks.

Carey Pensions claims it did not break conduct of business rules when it set up a Sipp for a client during a High Court hearing in March.

In the case lorry driver Russell Adams alleges Carey Pensions missold him a Sipp in February 2012, when he was paid an inducement of £4,000 into his savings account to encourage him to put money into rental scheme Store First.

He subsequently transferred £50,000 into a StoreFirst investment on 12 June 2012.

On the first day of the trial, 19 March, Judge Marc Dight said the case could shape the handling of missold Sipp claims.

Adams says Spain-based unregulated introducer Commercial Land and Property Brokers advised him to put money into the high-risk investment to get a “good return”.

Legal representatives for Adams allege the relationship breached conduct of business rules and he was not told how risky the investment was.

But legal representatives for Carey Pensions argue the conduct of business rules have been “misapplied in the case”.

It claims any guidance from the FCA about the responsibility of Sipp providers after 2012 should not be used in this case.

Other embattled Sipp providers such as Liberty Sipp and Guinness Mahon also face legal challenges for their roles in cases involving unregulated investments.


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

  1. Unregulated introducers making introductions for designated investments is regulated activity, as such such introductions are criminal. The Sipp providers who accepted such introductions and willingly and blindly provided their regulated keys to unlock the pension funds are complicit with this criminal activity. These providers should face criminal prosecution

  2. If Sipp providers start going bust because of this, are they classed as a Product Provider or will it fall on IFA’S again?

    I seem to be reading that SIPP administrators share IFA permissions and any failure would fall in our sub-class.

    I Hope that I am wrong.

  3. Amazed how little has been published on this topic. If the ruling is against the various SIPP providers, which the general consensus is that non advised SIPP’s will be held accountable to the SIPP provider. This will once again impact on consumer confidence.

    The FCA will need to manage the liquidations of the various SIPP providers very carefully. In all these cases the largest bidder for the business is the CMC who will actively seek compensation via the FSCS levy.

    The IFA community, need to increase their capital adequacy to legislate for the increased FSCS levy. This will make the possible DB British steel levy look like child’s play.

    • If things do play out like this, advisers need to pray for a rapid implosion of the SIPP market so all the compensation hits in the space of a year or two. If that happens, the IFA levy class will max out and the remainder will spill over to other levy blocks. On the other hand, if it’s a slow-motion car crash over several years, IFAs risk picking up a lot more of the tab.

      Maybe someone could do some sums to work out the different impacts?

    • Nicholas Pleasure 3rd October 2018 at 3:55 pm

      It may be that when we see the size of the levy we just decide not to pay up and let the FCA revoke our permissions. They need to remember that we are businesses and we need to be able to plan and to make a profit. We cannot be expected to constantly clear up the mess that they failed to prevent (again). Despite this being a discussion topic for at least the past 3 years.

  4. Can I just ask why taking a client’s instruction makes anybody liable for the future outcome of the client’s decision (when no advice has been given)?

    People don’t pay SIPP providers for anything other than processing their instructions and ensuring everything is HMRC compliant.

    This view that the provider should be responsible for accepting the suitability of the client’s own choice is worrying.

    Of course, when an unregulated introducer is recommending unregulated collective investments to a client and the SIPP provider is (or reasonably should be) aware of this, then that is a completely different matter.

    If a client instructs Hargreaves Lansdown to purchase shares/bonds/funds and these investments (particularly individual share/bond holdings) fail, then no one suggests HL should be liable for accepting this instruction.

    So why the push for the same with SIPP providers (with the exception of my obvious point above)?

  5. The guidance was issued long before 2012 plus assets should be suitable pension vehicles.

    What about the thematic review issued in 2009 by the FSA? This clearly warned about introducers and esoteric investments.

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