Sipp firms defend decision to allow suspect oil investment
Rowanmoor Pensions head of technical services Robert Graves has defended the firm’s decision to allow investments into a bio-energy firm suspected of fraud, saying that providers cannot do anything “over and above their due diligence” to mitigate against fraudulent activity.
Mr Graves was speaking to FTAdviser following the revelation yesterday that 12-15 Sipps firms had allowed investments into Sustainable Growth Group, which is currently under investigation by the Serious Fraud Office.
The SFO is currently investigating the activities of the group, holding company for Sustainable Agroenergy and Sustainable Wealth Investments, in connection with bio-fuel products involving Jatropha tree plantations in South East Asia.
Some 2,000 investors may have lost around £40m through investing in the insolvent company through their Sipps, according to the management receiver for the firm.
Mr Graves confirmed that Rowanmoor Pensions was one of the providers that allowed investments from Sustainable Agroenergy, a subsidiary of Sustainable Growth Group, to be placed on its Sipp.
He sounded a note of defiance on the decision, saying that “there was nothing wrong with the investment itself - it has fallen over because of the alleged fraud.”
Mr Graves also hit out at comments from Sustainable Growth Group’s receiver, Adrian Hyde, who said he had been following the Financial Services Authority’s review into regulation of Sipp investments and that “we can only hope that the affair will result in more stringent controls”.
Mr Graves said: “This suggests that Sipps firms do not do due diligence, which is incorrect. Sipps firms are responsible to do due diligence to ascertain it’s a bona fide investment.
“It is difficult to see what Sipp providers could do over and above current due diligence to stop fraudulent activity. Providers need to ascertain investments are bona fide and we did. If an investment has collapsed because it did not do what it said on the tin, that’s another story.”
Mr Graves pointed out that it takes its due diligence process “very seriously” and said that a lot of resources go in to the processes.
He said: “The principle is we are set up to allow as flexible a range of investments as possible. We will allow any investment unless good reason not to allow it, for example if it is in breach of any HMRC rules.”
Hornbuckle Mitchell also confirmed to FTAdviser that it had this investment on its Sipp, but said that it had later pulled it due to issues that arose during ongoing due diligence.
Steward Dick, head of sales at Hornbuckle Mitchell, said: “We initially approved this investment but our ongoing due diligence showed that it wasn’t what we thought it was. We had a number of clients who had invested and they had some difficulties.
“One client just changed his mind and had difficulty in getting money returned to him, so the administration and the operations did not work as we expected it to and we did not feel comfortable with this firm from a duty of care perspective.”