The 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.