TenetConnect has been ordered to pay compensation to a group of clients after the Financial Ombudsman Service ruled the firm had failed in its duty of care to clients making investments on a non-advised basis.
The FOS ruled that Tenet was wrong to help clients in 2010 to open new Sipp accounts to invest in an unregulated scheme to invest in a golf course in Spain, without giving them advice.
The firm’s clients transferred all their pension savings into property investments through Resina Golf Limited in Spain, only to find later that they actually owned land adjacent to the golf course.
While Tenet claimed the investments were unregulated, and that clients had invested on an execution-only basis, the FOS ruled that Tenet should have warned the clients about the scheme being an unsuitable investment.
The consumer watchdog argued that Tenet had been aware the clients were opening the Sipps only to facilitate the golf course investments, and that the investments and the Sipps were, therefore, linked.
In particular, the FOS noted that in January 2013 it had issued a regulatory alert raising concerns about firms giving advice to set up Sipps without considering the investments that the accounts would be used for.
In his decision notice, ombudsman Terry O’Connor said: “In my view, the alert only reinforces the existing duties placed on advisers by the rules and the regulatory principles. So TenetConnect should have considered the suitability of the investments given that it knew the only purpose of the Sipp was to invest in the golf course.
“An adviser cannot avoid its duty to give suitable advice by limiting the scope of the advice it will provide.
“TenetConnect knew that monies transferred into the Sipp would then be invested into a Ucis. This was, therefore, a connected transaction for regulatory purposes and should have been treated by TenetConnect as such.
“I am not persuaded the transfer and the Sipp opening were in reality on an execution only-basis. I accept TenetConnect’s point that they gave no advice. But in my view, they should have given advice.”