FSA must investigate Sipp due diligence processes, provider
The Financial Services Authority should examine the due diligence processes at self-invested personal pension providers, as a lack in this area is primarily to blame to for problems with mis-selling of esoteric investments, according to one Sipp provider.
In a video interview with FTAdviser, Martin Tilley, director of technical services at Dentons, discussed the recent debates over the extent to which providers should act as ‘gatekeepers’ over investments and said that firms do have a duty to ensure any investment is “bona fide”.
While he said that providers’ role is “not to determine if an investment is suitable for a particular client” - “that is really the responsibility of the adviser” - he added that firms must “understand the investment at its core level... to determine if there is any mis-selling of the asset or if there is any fraud that may occur on the asset in the future”.
Responding to a question over what the regulator should be doing in this area, Mr Tilley said that it will “need to have a look at the [due diligence] processes that are in place because unfortunately some providers have not been as diligent as they might have”.
This, he said, is what has led to “the problems we’re having now” - and is also the primary reason that “the FSA is looking at capital adequacy requirements” in relation to Sipps.
Discussing new proposed disclosure requirements being consulted on by the regulator, Mr Tilley said that any clarity being offered that will allow advisers and clients to make a more “informed choice” has “got to be a good thing”.
However, he added that the FSA is facing a problem as the Sipps industry covers a wide and disparate range of products, saying that “finding something in the middle ground that is fit for purpose is going to be quite challenging”.
To watch the full interview, click here.