Sipp providers have defended their due-diligence processes after a law firm representing individuals with investments in Harlequin overseas property developments through self-invested personal pensions wrote a letter demanding information on what safeguards were in place.
Hornbuckle Mitchell, Curtis Banks and The Lifetime Sipp have all confirmed to FTAdviser that they have Harlequin property investments within their Sipp books.
According to law firm Regulatory Legal, Guardian Pension Consultants also has exposure to Harlequin, although the group did not respond to FTAdviser enquiries.
Rupert Curtis, managing director of Curtis Banks, told FTAdviser that the provider has a “small exposure” to Harlequin, adding that his firm carried out due diligence but decided to stop accepting investments three years ago.
He said: “Sipp providers need to carry out due diligence on non-standard investments. We have robust internal procedures. Due diligence should be carried out by a combination of the adviser and the provider.”
Stewart Dick, head of sales at Hornbuckle Mitchell, confirmed that a number of its members had investments in Harlequin.
Mr Dick said the firm complied with due diligence obligations when accepting investments and that Hornbuckle had also stopped accepting investments in 2011.
He said: “We are satisfied that in accepting these investments we complied with all relevant obligations in place at the time.”
A spokesperson for The Lifetime Sipp highlighted that it uses the Sipp Investment Platform to work on the due diligence around the many investment schemes presented to the firm - and alternative and esoteric investments in particular.
It said: “The process TLSC employs with SIP is designed to confirm the investment scheme’s suitability to be held within a Sipp, and it is a fact that neither the advisers presenting Harlequin business to TLSC or SIP had any cause for concern when TLSC started to accept the investment.
“Hindsight is a wonderful thing, for it was only in the last two or three months that concerns have been raised within the industry around the Harlequin investment.”
A spokesperson for SIP added: “SIP carried out a simplified review of Harlequin Property investments in December 2010. A simplified review primarily aims to comment on whether an investment is ‘capable’ of being held in a SIPP or SSAS arrangement and whether the investment is likely to give rise to taxable property. It does not comment on ‘suitability’ of the investment and is not an in-depth due diligence exercise.
“SIP would like to place on record that within the simplified review carried out, it raised a number of concerns regarding the investment, many of which have now been raised by the FSA in its recent alert on Harlequin Property.”
Yesterday (5 March) the Serious Fraud Office announced it is looking into complaints over the Harlequin group and called for investors to come forward, especially those who have transferred their pension to make investments into overseas property developments operated by Harlequin.
Earlier in January the Financial Services Authority issued an alert warning advisers over recommendations to clients to invest large sums into Harlequin property investments through their Sipp.
The regulatory alert focused on advisers suitability considerations for non-mainstream assets and in particular said they should consider how building work is progressing including delaying factors, how customers’ funds will be used and an assessment of all publicly available information about Harlequin and associated parties.
A spokesperson for Harlequin said: “Harlequin fully endorses the alert notice and worked with the FSA in the drafting of it. Much of its contents match the guidance already posted on Harlequin’s website.
“However the alert issued by the FSA is simply that – an alert to reinforce guidance for regulated IFAs as to the due diligence they should undertake prior to investing in a Harlequin property.
“Harlequin welcomes such guidance, which is commonplace for investments of this kind, and ensures best practice is maintained within the industry.”
Regulatory Legal’s letter said that as a “basic minimum” it would expect Sipp trustees to have checked on up-to-date audited accounts of Harlequin, as well as: tax concessions; proof of title for land owned; planning confirmations; environmental impact assessments; proof of cost to build; and independent valuations.
Suffolk Life, which does not have any exposure to Harlequin, told FTAdviser that the requirements listed were in many cases the responsibility of the adviser rather than the Sipp firm.
Greg Kingston, head of marketing at Suffolk Life, said: “The additional due diligence checks are exactly the steps I’d expect advisers to consider if not undertake when recommending this sort of investment.
“I don’t believe they’re the responsibility of the Sipp provider when we’re discussing what are effectively collective investment schemes, albeit often unregulated.”
