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MPs grill FCA on supervision of Sipp providers

Work and pensions select committee chair Frank Field

MPs have asked the FCA to explain what repercussions a Sipp provider faces if it fails to meet the regulator’s due diligence expectations.

A letter from work and pensions select committee chairman and MP Frank Field to the FCA’s supervision director Megan Butler raises concerns about the role of Sipps in relation to defined benefit transfers.

It says it has become clear that Sipps are the primary vehicle used by unscrupulous advisers to channel individuals’ pension savings into unsuitable investments.

Furthermore the role of Sipps in intermediating this sort of investment is a longstanding concern for the regulator.

The letter goes on to say the FCA’s thematic review of Sipp operators in 2013/14 found “widespread” failings in due diligence and consumer protection.

The review also found “most Sipp operators failed to undertake adequate due diligence on high risk, speculative and non-standard investments”.

The surge in transfers heightens concerns about the destination of transferred pension funds while the Financial Services Compensation Scheme expects Sipp related compensation claims to continue rising.

In light of these concerns the committee asks the FCA to explain what value and proportion of funds transferred from DB pension schemes into Sipps in the last two years are held in the form of non-standard or unregulated investments.

The committee also asks what powers the FCA has to punish Sipp providers for failure in due diligence, and how have these powers been used.

Finally, the committee wants to know if the FCA is considering a ban of unregulated or non-standard investments altogether from inclusion in Sipps.

The subject of Sipps and non-standard investments is an area where the FCA is increasingly active.

Money Marketing revealed that exclusively obtained court documents show the FCA is set to claim a Sipp provider breached its conduct rules by accepting esoteric investments without due diligence.

Money Marketing has also reported extensively on claims issued against Liberty SippBerkeley Burke and Carey Pensions over their role accepting unregulated investments.


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. I have never understood the need for unregulated investments.

    Before those that support them start shouting, let me explain further. The option for Commercial Property Purchase is valuable for the right business owners, totally agree, for me this is where the unregulated investment trail within pensions should end.

    It is clear the fraudsters and a very small minority of questionable advisers have seen and used the opportunity of unregulated investments to mislead consumers. With large pension pots being targeted as they provide the largest opportunity.

    SIPP’s have there place and are important, but not at the cost of the consumers or the adviser community, who land up paying for the lost funds.

    There are plenty of regulated investments that can and do meet the requirements of 99% of investors. Why leave this loop hole open for a very small minority? Why give the bad element the chance to abuse and rib of consumers?

    The claims will eventually put the remaining good advisers out of business, even though they have done nothing wrong.

    • Leaving aside that due to tax restrictions on some perfectly valid asset classes forcing funds holding those assets to domicile offshore, merely to avoid double taxation, a more commonly true, albeit trite, reason is that “unregulated investments mostly exist to fulfil the fantasies of the promoters by failing to fulfil the desperate hopes of the investors.”

  2. MP’s involved in the implications of Sipp investments, sounds very much like the Judiciary might be getting some political guidance in deciding the Carey’s High court case particularly if the financial fallout unsustainable.

    ‘The letter goes on to say the FCA’s thematic review of Sipp operators in 2013/14 found “widespread” failings in due diligence and consumer protection’ – I take it this review reports on the failing of the first Thermatic review of Sept 2009 and the regulation that pre-dates that.

    Money Marketing has also reported extensively on claims issued against Liberty Sipp, Berkeley Burke and Carey Pensions over their role accepting unregulated investments. If Money Marketing wants to give me a call I’ll give them the low down on Denton’s owed Sippchoice

  3. If the FCA consider there has been a breach of its conduct rules, is it taking direct action against SIPP providers? If not, why not? Seems strange to be pursuing this only via the courts.

    Pure speculation, but if they have been taking direct action and the courts subsequently find in favour of the SIPP providers it would considerably undermine the FCA position. Which might explain their keenness to be involved in these cases.

    Potentially high stakes all round…

    • And, sometimes, private litigants are far more muscular and far quicker off the mark than the FCA. I’m thinking particularly in the appointed representative space, with recent cases like Ovcharenko and then R v FOS (2018 – EWHC 459 (Admin)).

      Amazing how having your own money on the line is a motivator for actually sorting things out…

  4. Julian Stevens 29th May 2018 at 3:52 pm

    Although Mr Field’s attempt to hold the FCA to account for its regulatory failure is well intentioned, the real issue isn’t so much about the use of SIPPs as a wrapper for unsuitable investments as about the investments themselves. What he should be asking the FCA to explain is why it’s failed to identify, home in on and take action against regulated firms selling (and/or being in any way involved with the selling of) unsuitable investments, regardless of what wrapper is used. What about all the sales of unsuitable investments not held within a SIPP? And what about the FCA’s failure to ensure that any firm selling high risk investments hold suitable PII cover for such activities? The fact that so many firms don’t hold such cover is the very reason why so many fold as soon as the first few indefensible complaints start rolling in and dump their liabilities onto the rest of us by way of the FSCS.

    • Let’s focus on what the harm is here, which is people losing their retirement savings.

      The bad guys will dream up any number of wacky things for suckers to throw their money away on. You could go after all those, but there’s a bit of whack-a-mole about that.

      The population of SIPP operators who will take these investments is far smaller than the population of the investments themselves, so it’s a bottleneck in the transmission chain from victim to scammer.

      With SIPP operators also being regulated, they *should* be easier to control (that is, there’s no conceptual reason why that shouldn’t be the case) and you’d think that the various regulators in this space (FCA, HMRC) would put a robust control strategy in place to harden this part of the value chain against exploitation – after all, you only need to break one link in the chain for the scammers’ whole plan to unravel.

      • Politicians and regulators could have stopped this long ago. They could put a stop to it today rather than faff around with court cases tomorrow. There are a number of different ways to do it, many very simple. Perhaps the real question is why haven’t they?

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