More years ago than I care to remember, when I was a Money Marketing reporter, I rang a Scottish Amicable marketing director for my weekly chat.
Back then, Brendan was ScotAm’s marketing supremo. Softly spoken but incisive, he provided access to the firm’s other senior directors and his views on industry issues were always worth writing about – when he wanted to be on the record, that is.
As we were having our always unattributable conversation and chewing the fat on various issues, Brendan let slip he thought IFAs and life offices should be prepared to shop each other to the regulator if they felt something was wrong.
Ahead of the times
His comment made my ears prick up. Back then, the idea of whistleblowing was almost unheard of. If you knew a firm down the road was doing something shabby, you might sigh heavily and then ignore it or gossip about it at your next LIA or Nfifa meeting. What you generally did not do was put in a call to Fimbra or Lautro or SIB, the financial watchdogs of the time.
So I said: “That’s a good story, Brendan. Are you willing for me to use it in the paper?”
“Let me get back to you on that,” he replied and an hour or so later the call came: ScotAm would be happy for me to run the piece in Money Marketing – and attribute it directly to the company.
I cannot remember where the piece appeared in the paper but it engrained in my mind the fundamental concept that if you think something is wrong, you need to do something about it.
You certainly do not pretend it has nothing to do with you, nor tell yourself that it does not matter how dodgy the underlying product a punter wants to stuff into your wrapper is because you are offering an execution-only service.
By now, readers may have guessed where I am heading with this column: the report in last week’s Money Marketing that the Financial Ombudsman Service is looking again at a ruling it made against Sipp provider Berkeley Burke.
The ruling concerns an unregulated investment of £24,000 into Sustainable AgroEnergy made into one of its Sipps by a client who was himself introduced by an unregulated agent.
From Berkeley Burke’s perspective, the ombudsman’s ruling is highly unfair. As the Sipp wrap provider, the firm made sure the client signed a form saying he knew this was a high-risk investment and had not received advice on it. Unsurprisingly, the firm feels that when the FOS came calling, waving that piece of paper around should have been enough to see off any claim for redress.
It seems clear this is a classic example of regulatory tourism by a muppet investor who is now seeking to recover some or all of his lost assets by fastening on the only regulated entity in the whole sorry affair.
I do not necessarily want to argue strongly in the ombudsman’s favour but we should also consider some of the other facts of the case.
The problem is, for any professional reading the marketing blurb for this particular investment, alarm bells should have been clanging.
The dream being peddled by Sustainable AgroEnergy was that of making money by converting the seeds of the jatropha, a small shrub grown on Cambodian plantations, into bio-diesel.
Non-regulated UK-registered companies were offering investors in Sustainable AgroEnergy “massive 345 per cent cash returns over the first five years – up to 93 per cent a year”.
It also became clear in 2011 that Sipps were being heavily touted as a vehicle for these investments, presumably as a means of maximising tax-free returns.
But already in February 2010, the Ecologist magazine was quoting experts who said “claims made by the investment companies were highly dubious and conflicted with evidence collated by NGOs”.
In 2011, Friends of the Earth published a report titled, Jatropha: Money doesn’t grow on trees – 10 reasons why jatropha is neither a profitable nor a sustainable investment.
In addition, according to financial journalist Gavin Lumsden who wrote about the affair in 2012: “Auditors PricewaterhouseCoopers [had] raised concerns that Sustainable AgroEnergy would not be able to pay investors and had not maintained appropriate accounts for the year to 31 March 2010.”
In other words, there was a growing body of evidence in the public domain to suggest Sustainable AgroEnergy was at best a highly dubious investment vehicle and at worst a scam designed to part gullible investors from their cash.
A trial set to start next month at Southwark Crown Court, in which a number of the company’s associates will be in the dock, will determine which of the two is closer to the truth.
Meanwhile – and regardless of the outcome of the FOS review of its original findings against Berkeley Burke – it occurs to me that the key advice is: if something out there smells fishy, do your homework thoroughly before you stick your snout in the trough.
Nic Cicutti can be contacted at email@example.com