PensionsJul 23 2015

Ombudsman rules Sipp is blameless for £40k loss

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Ombudsman rules Sipp is blameless for £40k loss

The Pensions Ombudsman has ruled in favour of self-invested personal pension provider Yorsipp after an advised client complained he lost £40,000 as a result of the provider failing to monitor the performance of an investment.

The decision notice stated the complaint from Alexander Toward was not upheld because the evidence falls short of establishing that injustice was caused as a result of any failure on the part of Yorsipp to exercise due care and diligence.

Mr Toward complained Yorsipp failed to carry out adequate due diligence on Professional Funding Services before sanctioning his request in March 2011 to invest £40,000 from his Sipp in PFS by means of an unsecured loan to fund commercial litigation.

Mr Toward also contended that Yorsipp did not subsequently monitor the performance and security of his investment in PFS and as a consequence of these shortcomings he lost the £40,000 investment.

Mr Toward signed up for the Sipp in December 2012, and signed forms stating he had read the about the key features and the IFA will regularly review his investment portfolio with him.

However, Mr Toward said he signed the form and PFS application without reading the declarations and provisions because he had trusted the advice given to him by the advice firm.

Pensions ombudsman Anthony Arter responded: “I cannot ignore the fact Mr Toward clearly signed agreements setting out the level of personal responsibility which he has taken on.

“Having declared twice to Yorsipp that he was a professional investor, I consider it reasonable for them [Yorsipp] to have assumed that Mr Toward should have been able to ascertain himself that Mr Stewart and Ms Fowler (if not already disclosed by Mr Stewart) were directors of both (adviser Stewart Asset Management) SAML and PFS, from the information readily available on the internet.”

Mr Arter added that if the client has an adviser - as Mr Toward had - and “things go wrong, in my view, the IFA should be taking responsibility if their investment advice is established to be inappropriate”.

Mr Toward was a client of the adviser Stewart Asset Management for over 20 years, but the firm commenced wind up in November 2013 and is currently in liquidation.

The firm’s directors Brian Stewart and Jacqueline Fowler resigned in January 2013 and November 2012 respectively.

Mr Arter added that Yorsipp adequately reviewed the PFS investment in order to try and protect Mr Toward’s interest and to ensure no unnecessary tax penalties were incurred.

Mr Arter noted that the regulator published guidance in September 2009, following on from a Sipp thematic review, which told Sipps they need to monitor and bear some responsibility for the quality and type of business introduced to them; be responsible for the compliance aspects of individual Sipp advice; and routinely record and review the type and size of investments recommended by advisers.

“In my view, the checks which Yorsipp undertook were adequate to meet the requirements imposed on them by the FCA and HMRC for such investments at that time,” stated Mr Arter.

“I am also persuaded that Yorsipp reviewed their business in light of the findings of the 2009 thematic review and that they have robust systems and controls in place allowing them to monitor the investments made by their clients.”

peter.walker@ft.com