Law firm alleges ‘mass scale’ Sipp abuse after case review

Law firm Regulatory Legal has claimed its review of 612 investor case files who were invested in Sustainable Growth Group shows that advisers appear to be involved in “mass scale Sipp abuse”.

A review of 612 investors who invested in the Sustainable Growth Group via a self invested personal pension has found that in 91 per cent of cases there was no mention that SGG was going to be the only investment in the Sipp, data from law firm Regulatory Legal has revealed.

The Serious Fraud Office is currently investigating the activities of Sustainable Growth Group, holding company for Sustainable Agroenergy and Sustainable Wealth Investments, in connection with bio-fuel products involving Jatropha tree plantations in South East Asia.

The management receiver of SGG, Chantrey Vellacott, previously told FTAdviser that 2,000 investors may have lost around £40m through investing in the bio-fuel investment company.

Regulatory Legal’s review of the case files found that the only transacting undertaken was a transfer of other pensions to Sipps and, in the majority of cases, advice had not been given on the unregulated investment itself but only providing on the Sipp transfer itself.

According to Regulatory Legal, in all but 3 per cent of cases, the investor had never met the adviser who gave the advice to transfer to the Sipp.

In a further 98 per cent of cases, Regulatory Legal found that the investor was told by the adviser that they had to undertake the transfer to Sipp to access the ‘low risk’ SGG investment.

The small number of cases where advice on the investment was given mentioned that the investment was unregulated. However, nearly all those that provided a risk analysis described the SGG fund as low/medium risk.

The review also found evidence of pension liberation, transfers of occupational pension schemes, transfers where the Critical Yield exceeds recommendations and likely to be unachievable and pension transfer ‘advice’ given by unregulated individuals.

This follows the Financial Services Authority’s alert on 18 January, which states that adviser should consider the investments being planned as part of the pension transfer advice.

The alert flagged up that financial advisers have to ensure that they give careful consideration to the particular features of the investment in question and it appears this has not been the case with SGG, Regulatory Legal said.

Regulatory Legal intends to ask all cases where a regulated IFA is involved to justify the transfer.

A spokesperson for Regulatory Legal said; “This appears to be pension abuse on a large and well planned scale. Some of the IFA firms behind this were simply recruited to lend their names to the transfer.

“Some of the firms involved have already left the business and any liabilities will fall to the FSCS”

“The FSA alert gives guidance that is relevant to the SGG investment. SGG is not the only example where advisers appear to be involved in mass scale Sipp abuse. There are others and they will come to the fore in time.”