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Sipp providers drop passport advisers

Some Sipp firms have revealed they will no longer deal with international adviser firms that passport into the UK, warning it could represent too much of a compliance risk.

Hornbuckle Mitchell says it will no longer accept new business from any international adviser firm and Curtis Banks says it will no longer accept business from international adviser firms that passport into the UK to advise UK-based clients.

Hornbuckle Mitchell sales and marketing director Mary Stewart says: “We have stopped accepting international business.”

Curtis Banks managing director Rupert Curtis says: “We will no longer accept any UK business from an international adviser. We will now only accept UK cases through firms directly regulated by the FSA. We will use international advisers only for international clients. We have decided it is not ideal to have someone regulated in a different country doing UK Sipps.

“If a firm is directly regulated by the FSA you can be more comfortable with that than with a firm that passports in.”

Last month, the FSA updated its register to clarify that Cyprus-based firm Inter-Alliance Worldnet Insurance Agents and Advisors is not permitted to conduct Sipp business in the UK under its passport. The company had submitted Sipp business to providers such as Hornbuckle Mitchell and Curtis Banks through its UK branch.

Talbot & Muir director Nathan Bridgeman says his firm never accepted Sipp business from overseas advisers. He says: “We only accept business from FSA-regulated UK advisers. We want to be able to meet with advisers face to face to continually check they hold the relevant licences.”

AJ Bell decided to stop accepting business from international advisers around 18 months ago after noticing that a number of adviser firms had moved offshore and were now passporting into the UK.

Marketing director Billy Mackay says: “We became uncomfortable about it as it is difficult to track. There is no doubt that the FSA is expecting providers to track very carefully where they are getting business from.”

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Comments

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

  1. Do remember that we are EU members and that the EU takes precedence over UK law! Yes even over the mighty FSA and UK product providers such as HM are bound to follow EU law. It may well be that HM et al don’t actually know what they are doing and are wide open to challenge!

    So let me give them some advice: Under EU law super-equivalence is not permitted, which is why the FSA are unable to apply their proposed rules to inwardly passporting firms, as this would bring the FSA into direct contravention of Article 31 of the L1 Directive (2004/39/EC). NB: Firms passport into the UK from the EU just as UK firms can passport into EU states via the UK. This two way traffic is the corner stone of EU law and the principle of trading harmony.

    This is why the FSA have confirmed they will not be applying the RDR rules to firm’s exercising Article 31 rights in their draft notification to the EC (ref CP09/18 Ann B pars 26 and 51).

    EEA investment advisers will be able to provide investment advice to UK customers under the more relaxed MiFID regime and it is not open to HM to refuse an agency to a legitimate EU regulated firm.

    Seems to me that HM are making a pigs ear out of this one! I am quite open to views on this one so if I’m wrong perhaps HM would like to answer the above?

    SIMON MANSELL
    TEMPLE BAR IFA LTD

  2. Simon

    I agree with all that you say but providers will always err on the side of caution as, even though the FSA should, they really dont seem to care about EU or any other laws of the land. Repeated perceived abuse of powers are testament to that.

    Also – if a provider is not comfortable dealing with certain introducers isnt that their call?

  3. Simon – How does allowing passported business that is difficult to audit fit alongside the Duty of Care Trustees (ie HM) have under the Trustee Act 2000 and indeed the more recent due diligence that the FSA is asking SIPP providers to undertake under the 2009 SIPP operators thematic review?

    Strikes me as a making a sensible business risk decision.

  4. Isn’t this a response by Hornbuckle Mitchell against a particular firm who were passporting into the UK rather than coming in via MIFID.

    I think that this will be a very interesting area to watch as the FSA is unable to stop people exercising their rights of “freedom of establishment” and “freedom of service” under EU law. I suspect that any firm who is MIFID registered and regulated by an EU regulator would have a claim against any firm not opening an agency for them on the basis that they were not UK regulated.

  5. agree with Pensions Man – you need to be aware of the actions of Inter-Alliance before you can comment on this

  6. If a product provider declines to do business with an intermediary surely that is a commercial decision?

    And don’t delude yourself that the FSA can’t /won’t make life very difficult for providers who will accept business from “anyone” ……

  7. The point that I was making was that all UK law is subservient to EU law and yes even the trustee act. Trading harmony is what EU law is all about. Of course an agency can be refused but not on the basis that it is an EU firm regulated by an EU member state. If this is the motive then it is subject to challenge under EU law.

  8. Monsieur Reynard

    I can assure you that the FSA could not care less about the offshore advisors, we are well beyond their reach. The onshore product providers are only too keen to welcome our business and good business it is.

  9. Nemo of the Caribbean 2nd September 2010 at 1:58 pm

    I have no dealings with any of the provider’s mentioned here but shall watch this one with interest as it could run to other providers and into other areas of advice if not resolved quickly. Closing or refusing to open an agency for a duly passported firm that is appropriately authorised in another EU member state, based simply on that firm’s jurisdiction of domicile is illegal under EU law as it constitutes discrimination. Of course if there is some other “valid” reason then that is another matter. The proposition that it is a commercial decision of the provider is untenable just as the proposition that a hotelier could refuse to give a room to a Spaniard simply because he is Spanish is untenable: EU law is perfectly clear. MiFID is irrelevant here as a SIPP is not a financial instrument. MiFID only covers the investments inside the SIPP.

  10. Gentleman, ignore the EU issue, this has more to do with offshore advisors outside of the EU transfering final salry schemes into SIPPS and taking anything up to 15 – 20% commission along the way. Well done to the SIPP providers for finally taking a responsible approach – lets see if other product providers follow.

    Good article Simon Mansell, but look at the wider picture and stop thinking the world revolves around the EU. There is indeed life beyond the borders of the EU.

  11. Compliance Officer 2nd September 2010 at 6:16 pm

    The passporting issue also depends on the nature of the SIPP (ie its contractual basis).

    A SIPP which is an “insurance contract” could well be covered by the IMD. However, a SIPP which is a “trust-based scheme” may not be covered by MiFID.

    The firm I work for operates a trust-based scheme which is not classed as a MiFID investment (we have confirmed with FSA that we are exempt from MiFID under Article 2). This is the case even though the SIPP can hold MiFID investments.

    As there are no passports that cover this type of contract we have concluded that the only way this particular product can be advised on is by those holding UK FSA permissions for advising on ‘personal pensions’.

    One final thing that all SIPP firms need to consider is whether, by allowing their SIPP to be sold overseas, they are passporting into an EU state. Much will depend on how services are delivered but passporting is not an easy subject to grasp and the guidance in this area is not very helpful. I can therefore sympathise with SIPP providers who have decided not to take the risk.

  12. @Simon Mansell

    Granting an agency to an intermediary firm is “within the gift” of any commercial enterprise. By the same token it is a commercial reality that agency applications are declined or revoked.

    EU legislation be hanged – this is just good business.

  13. “Agency”?

    Is the real agency not between the adviser and the client? How can a SIPP provider refuse to set up a contract with a qualifying UK resident who is happy to use an adviser based in another EU state?

  14. This whole argument may simply be one of agency but it may also raise questions of greater interest to the many thousands of UK IFA’s shortly to be disenfranchised under yet another example of retrospective regulation on IFA appropriate qualifications.

    The FSA may be above UK law but it is subject to EU law. For example the FSA claimed its decision to drop the menu and IDD was based purely on its own research which found that the documents had not achieved their objectives (fees) and that it had nothing to do with pressure from the European Commission? It was then discovered that the IDD was dropped because it breached EU trading harmony and was super equivalent! Who knows this may be the future of RDR but in the interim many thousands will go out of business – or will they? The EU may offer a future to UK IFA’s who join an EU regulated IFA and who then passport into the UK.

    EU law dominates UK law – fact! Just as an EU doctor can qualify in the EU and practice in the UK so too can an IFA. It is interesting also that the new degree standard qualification for a Nurse is not being applied retrospectively and will not also be applied to an EU Nurse who applies for work in the UK.

    Ask yourself these simple questions: Is RDR and in particular level 4 “super equivalent” under EU law and can it be applied to EU advisers passporting into the UK? The answer is NO!
    Be cautious about whose views you accept and remember the huge army of RDR sycophants who have benefited by their alliance with the regulator. Look also at the growing number of “carpet baggers” who see this as an opportunity to buy up practices cheap! They are self serving and a reflection of a weakness in this industry.

    It may be Mr and Mrs non level 4 IFA that you do have a future post 2012. It may also be that many others will see benefits in an alternative EU regulation and if this exodus is large enough it will undermine the fee funding of the FSA or its namesake as the.

  15. Evan has written almost exactly what I was going to. Look at it another, if a client arranges a SIPP with their then adviser who is UK FSA regulated and then wishes to appoijt a new agent who is EU passported in, will the firm refuse to accept the clients chosen and legal agent?
    I can understand HM’s reasoning and I don’t blame them, but this looks like yet another can of worms.
    Does not the client have the right to appojt their own agent to obtain informaiton on their behalf (an attorney) even if they are not an authorised individual? Accepting instructions may be a different matter.

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