Sesame argued that it was not responsible for the investment in the Ucis fund
Sesame must compensate a client after one of its appointed representatives invested a client’s assets into an unregulated Cape Verde fund.
Sesame initially argued that it was not responsible for the advice but the Financial Ombudsman Service has ruled otherwise.
In 2012, the client, Mr P, was advised to transfer his pension benefits, which were held in a number of schemes, into a self-invested personal pension. The total fund was then invested in an unregulated collective investment scheme.
In 2014, the client complained about the advice to transfer into the Sipp, which was given by Moneywise Mortgage & Financial Planning, which was an AR of Sesame.
Sesame accepted responsibility for the Sipp advice but said the Ucis investment was not allowed under the scope of the AR’s permissions. It says this is confirmed in its compliance manual.
In the provisional FOS decision, ombudsman Doug Mansell says: “I understand Sesame’s point, and have considered the core compliance manual it’s referred to. But the AR was required to follow the relevant rules set out by the regulator. It had an overall duty to act in Mr P’s best interests and was required to know its client and to give suitable advice.”
He adds: “The appointed representative couldn’t have given suitable advice to Mr P on the pension transfer without also considering the investment to be made. The Sipp was simply a wrapper to hold investments, and the sole reason for opening the Sipp was to make the investment in the Ucis. The letter the adviser sent the Sipp provider in March 2012 for the transfer noted that it was to fund a property purchase with the Resort Group. It’s clear from this the adviser was fully aware this investment would be held within the Sipp.”
Mansell said the Sipp transfer advice could not be separated from the investment so Sesame was responsible for both.
The FOS deemed the advice unsuitable and said the adviser had not established if Mr P was willing to invest in such a risky investment.
Sesame disagreed with the provisional decision, saying it had shown it never authorised its ARs to advise on unregulated investments. It also argued that because commission was paid to an unregulated business, it should not be responsible for the advice.
However, the FOS continued to uphold the complaint. It said Sesame should pay Mr P £450 for the trouble and upset suffered. It also ordered Sesame to compensate Mr P by comparing the performance of Mr P’s investment with a benchmark and to pay the difference between the fair value and the actual value of the investment.