Sipp provider legal fight seeks donations through adviser trade body

Adviser trade body Libertatem is asking financial planners to contribute to the cost of Sipp provider Berkeley Burke’s legal battle against the Financial Ombudsman Service.

The lobby group has decided to lend its weight behind Berkeley Burke’s appeal, helping form its legal case as well as raising donations.

Last October, Berkeley Burke lost a High Court appeal against a FOS decision after a lengthy fight over what responsibility Sipp providers should have to vet client investments.

The original FOS ruling in 2014 found against Berkeley Burke for failing to carry out adequate due diligence on a £29,000 unregulated collective investment scheme.

The judge’s ruling on appeal last October was that checking an investment in a foreign country was effectively an application of existing due diligence requirements, which Berkeley Burke did not meet and was therefore liable for losses.

The Sipp provider won the right to go to the appeal court when the judicial review failed, with hearings due to recommence this October.

Libertatem director general Garry Heath tells Money Marketing that meetings have now been held with various stakeholders over Berkeley Burke’s defence, and that financial planners should also be taking an interest because, if FOS wins, “they will use this precedent as a hammer – not only on other Sipp players but also on all advisers.”

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Heath says the legal teams plan to argue that the FCA has obstructed government policy; the government instituted Sipps as a vehicle in which individuals decide their own investment, but now cannot without the Sipp company or adviser “effectively acting as guarantor”.

Heath says: “It is no longer just about a Leicestershire Sipp provider who has fallen foul of retrospectively applied rules, but has instead become about the power of the FOS and the FCA to use principles to change the game at will.

“Libertatem will be offering help as requested, both because it’s an important case that affects every adviser but because the Berkeley Burke advisory firm is a member.

“After the huge expense of a five-year legal fight, Berkeley Burke is looking for financial help from those with a stake in the outcome in order to keep the case going to appeal. The financial services industry needs Berkeley Burke to win this case.”


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. This is a conundrum…..

    On the one hand, I believe a SIPP, does exactly what it says on the tin “self invested personal pension” with the emphasis on SELF, the SIPP itself nor the company trustee are not responsible for the individual investments under its banner.

    This must surely lie with the adviser recommending said investment and/or the individual making the decision to use this investment.

    On the other hand, the use of a label, (“self” in this instance), to absolve one’s responsibility or get their own way, can lead to miss use, there are many other labels as well like “Insistent” “Execution only” and my favourite used by the FCA themselves “Bias”.

    We have a huge responsibility, but then again so do the clients, because the moment something fails to go their way some will shout from the rooftops “miss-sold” and “risk” and run to the closest CMC.

    The regulators and is stooges, cannot be allowed to remove or eradicate entirely “risk”… like a child they need to scrape their knees from time to time and fall from the apple tree scrumping, if the child puts his or her hand through the fence to pet next doors vicious dog after repeatedly being told its dangerous and don’t, then looses their fingers….who’s fault is it ? the dog, the parent, the dogs owners, the child themselves or the gap in the fence ?

    A combination of all….. sometimes the big pile of brown stuff happens !

    Life is not black and white …..there is always the brown in-between.

    • DH makes some very valid points and having been within the industry I share most of them. Some “self investors” despite warnings went ahead and many knew exactly what they were getting and why they were making the investment. As an example some “kicked back” cash and this was the primary objective. These should be responsible for their own self harm. Others were naïve and some investments were without doubt totally unsuitable. Some did result in ownership of asset, which just didn’t perform as advertised. Some, were obvious scams where no asset was ever obtained, which should not have been accepted. So where to draw the line? That’s the grey (brown) bit.

  2. Battle Of Little Bighorn – Custers Last Stand comes to mind

  3. The challenge is, that operating a personal pension plan for a retail customer is a FCA regulated activity and has been for over a decade.
    There is no retrospective application of rules in this case or many other similar cases relating to unsuitable investments. The FSA sought to highlight the responsibilities of SIPP Operators and advisers on several occasions regarding SIPPs and potentially unsuitable investments.
    An investment that was ‘SIPPable’ was not necessarily suitable.

    • I’m inclined to agree. SIPP providers cannot facilitate access to any old investment, however wildly speculative or risky, and wash their hands of any responsibility for having done so on the grounds that it’s up to the customer to decide for himself. Many customers simply have no idea of what they may be putting their money into. At the very least, they should only allow investments in anything potentially dangerously off-piste if it’s been subject to regulated advice. Then they can say that they did undertake proper DD and allowed customers to invest only on the say-so of an appropriate third party.

      I don’t think this proposed legal challenge is likely to succeed.

  4. Martin, So ? where do we and more importantly the regulator draw the line

    Just, going for or blaming the lowest common denominator is not, or should be, the basis of justice, in a world where perceived ignorance or ill judgement is excused from the investors themselves !

    Then its time for the regulator/FOS and its stooges to step up and do the right thing, they are the line, and in this case I don’t believe Berkeley are entirely guilty. The FCA/FOS cannot continue to bend the rules to suit a particular outcome, by saying “you didn’t follow our rules or you didn’t relax our rules enough and act in the spirit of regulation, crikey that’s trying to work with a swarm of bees in your head

    Like King Solomon, if a clear exit or answer cannot be found the baby (metaphorically speaking) needs to be cut in two !

  5. TBH, whilst I have no sympathy for BB if they have been working with unregulated introducers, they did warn the client involved many times to seek regulated advice and that the investment was very high risk.

    In their place, I would have not accepted it, but just because they did I don’t think they should be liable for any loss the client made in selecting it.

    Things are going very wrong and it seems that the public cannot lose as if the investment works they win, if it doesn’t, they still win.

    If the FCA took the stance that people making their own investment decisions would be solely responsible for the consequences of doing so, it may just add some weight and credibility to paying extra for an IFA to shoulder that responsibility.

    This would only be a good thing for all concerned.

  6. Complaint Handler 2nd August 2019 at 2:23 pm

    There were many SIPP providers who sprung up purposefully to take on D2C SIPPs where clients were being introduced via an unregulated introducer. Those firms knew those clients had been effectively advised to make these investments, how could they not when the Introducer would submit high numbers of clients with relatively small pots and all ended up in the same investment. By not preventing it, they became part of the problem. Had it been one client, one case, then I’d feel for the situation, because that’s entirely different. Alarm bells should have rang when introducer patterns emerged, whether the investment was genuine or not.

    • I wouldn’t disagree with this.

      The problem is that this is being applied across the board now.

      Rather than using this as a blatantly obvious way to signpost the value of seeking regulated advice, the FCA have not highlighted the protection this offers and instead has granted the same protection to those not willing to pay for professional advice as those that do.

      This seems wrong to me on every level.

      • Complaint Handler 2nd August 2019 at 3:00 pm

        Agree with you Arthur.
        What I don’t want to see is SIPP providers being held accountable for poor client choices where they have genuinely made a personal poor decision (or someone has egged them to doing so). I don’t think providers should be repaying client losses for poor investment choices, but SIPP providers who accepted large numbers of unregulated introducers where funds all went into one asset should have caused concern and realistically they possibly shouldn’t be Fit & Proper for allowing it. That said, the losses should be borne by the people who essentially were being greedy and/or ignorant to what they were doing. They’re adults!
        Those actually responsible aren’t regulated and therefore the FCA cannot act against them, but that doesn’t mean they then should act against the only regulated firm in the process and lay blame entirely at their doorstep either.
        I want BB to win, because client ‘idiot’ factor isn’t an excuse really, but they aren’t entirely blameless is my view. Plus it only punishes the whole market as ultimately BB would then have to wing up and fall on the FSCS and the CMC’s are the winners here – most of whom were the unregulated introducers in the first place. You couldn’t make it up!

    • Take the Ethical Forestry investment which is now worth £0 and under investigation by Fraud squad

      Berkeley Burke took £1.5 million through their books but biggest is Liberty Sipp who took £45 million. At this moment Liberty Sipp seem to have got away with it.

  7. There are many issues here but perhaps one of teh most pertinent is in respect of how the Ombudsman dealt with teh complaint and the justification for the outcome.

    Specifically, he stated in relation to the expectations of BB “..what I consider to have been good industry practice at the time. This goes wider than the rules and guidance that come under the remit of the FCA.” In other words he can determine the course of action BB should have taken even if it had never arisen or been commented on before by anyone, including the regulator. This is further justified by saying this is merely applying the FCA’s Principles for Business.

    On this basis the Ombudsman detrmined:

    “Taking into account all the available evidence and the relevant considerations I’ve described, and what’s fair and reasonable in the circumstances of this case – in relation to the SA investment – my view is that BBSAL should, at least, have:

    1. Identified SA as a high-risk, speculative and non-standard investment, so it should have carried out sufficient due diligence.

    2. Considered whether SA was appropriate for a pension scheme.

    3. Ensured that the investment was genuine and not a scam, or linked to fraudulent activity.

    4. Independently verified that SA’s assets were real and secure, and the investment operated as claimed.

    5. Ensured that the investment could be independently valued, both at point of purchase and subsequently.

    6. Ensured Mr C’s SIPP wouldn’t become a vehicle for a high-risk and speculative investment that wasn’t a secure asset, and could be a scam.”

    That’s a very specific list that on the basis described by the Ombudsman should have been obvious to all SIPP operators and therefore no surprise. It surely follows that these criteria make the investment in question immediately, and obviously, unviable both commercially and practically for BB or anyone else. So, did they ignore the blindingly obvious, or is this retrospective application of rules, or a mix of the two?

    To cap it all he did address the point about suitability:

    “I’m not making a finding that BBSAL should have assessed the suitability of the SA investment for Mr C.”

    “It’s that BBSAL should have concluded the investment wasn’t acceptable for his pension scheme and thereby failed to treat Mr C fairly or act with due skill, care and diligence when accepting the investment.”

    I’ll let you make your own mind up on that one but seems to dovetail nicely with the current discussion around DB transfers on what constitutes advice…

    I’ll spare the protracted legal and technical arguments but the judge in the case ultimately agreed that what the Ombudsman did was correct.

  8. Who in their right mind would fund this appeal as it was mostly down to Regulated Sipp Providers dabbling in unregulated activity and not regulated IFA. Let BB take whats coming I say.

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