PensionsMay 23 2016

Fos demands payout for ‘execution-only’ Harlequin investor

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Despite signing several declarations to say she had not received advice, an adviser’s client has won compensation after an ombudsman ruled “she thought she was receiving advice.”

In late 2011, Mrs H was introduced by her mortgage broker to a “pensions expert”, who she believed was working for LP Financial Management, formerly known as Lansdown Place Financial Management.

The pensions expert was, in fact, a Harlequin agent who had previously worked for LP.

The agent wanted to arrange for Mrs H to move £65,000 from several pension schemes, which included a final salary pension, to a Sipp so she could invest £58,500 in a Harlequin property.

Mrs H said she agreed to invest, believing the fund was safe and that her money would be tied up for just two years.

LP arranged the Sipp on behalf of the Harlequin agent and the adviser stated it did so on an “execution-only” basis, having satisfied itself it could do so using forms provided by the pension administrator.

Mrs H signed a form with a box ticked to state she had not received advice about the Sipp and the underlying investment. A declaration in the form stated she had decided to invest based on the information from the investment provider.

The declaration also contained statements about the risks, making it clear that there was no guarantee, there were higher risks and Mrs H could get back less than the amount invested.

The form also explained she might not easily be able to sell the investment and it was not covered by the Financial Services Compensation Scheme or the Financial Ombudsman Service (Fos).

Mrs H was offered a review of her decision by LP in 2012 and again signed to say she was an execution-only client.

At the end of 2014, Harlequin Management Services (South East), the UK sales arm of the embattled overseas property development business which trades as Harlequin Property, entered liquidation.

In February 2015, Mrs H complained to LP and then Fos.

Ombudsman Roy Milne said that, as the regulated party, LP should have known it had a duty of care to Mrs H. “A few basic checks would have shown that Mrs H had been persuaded to transfer all of her pensions to the Sipp,” he stated, adding that this was so she could invest in a high-risk unregulated investment.

The ombudsman said LP should take ownership of the Harlequin investment by paying a commercial value acceptable to the pension provider. This amount should be deducted from the total payable to Mrs H.

LP was also told to pay Mrs H £250 for distress and inconvenience.