The letter from The Lifetime Sipp Company, seen by FTAdviser, says that until the investments are realised or a professional valuation is available, the value of their Harlequin property investment will be shown in future valuations as £1 “following discussions with our regulator”.
The Lifetime Sipp Company said it will be adopting this approach “as an accurate valuation is not currently available”.
Kelly Herbert, administration manager at Lifetime Sipp, told FTAdviser that following regulator concern of the lack of valuations on Harlequin properties, it was “advised” by the FCA to write to each client and state that the investments would be valued at £1.
The FCA said it had told the firm to send out letters to Harlequin clients, but denied giving a specific valuation of £1, saying “how each firm values the investment is up to them.”
Ms Herbert added that the conversation took place during its annual audit and therefore that it is likely other Sipp firms will follow suit in the future.
Previously, Hornbuckle Mitchell and Curtis Banks confirmed to FTAdviser that they have Harlequin property investments within their Sipp books.
A spokesperson for Harlequin questioned the valuations, suggesting that the writedown is based on the fact that its UK sales arm has entered administration and does not reflect the financial position of the overseas construction arms that are building the investment properties.
He said: “The overseas companies have not entered into any insolvency procedure. Therefore any valuation based upon Harlequin Property’s administration process is both arbitrary and highly questionable.”
Ms Herbert said: “We were advised by the [Financial Conduct Authority] to issue letters and to make them aware of potential problems of the investments. As and when we hear from the FCA, we will be keeping business partners and clients informed.
“I know that the FCA has been speaking to a number of Sipp providers and they said they will write out to all of their clients.
“I think we were one of the first to send this letter. We were audited in June and we were given until 26 July to issue the letters.”
Ms Herbert said that they are receiving many calls from worries investors, but the Sipp operator is referring them to their adviser.
When asked how investors have reacted, Ms Herbert said that half of the investors think the valuations will come eventually.
Harlequin’s sales arm, Harlequin Management Services (South East) Ltd, which trades as Harlequin Property, entered administration earlier this year. At the time, a Harlequin spokesperson said the administration “will not threaten” investments.
A spokesperson for Harlequin said: “Harlequin Property is a separate company that acts as the primary UK property sales agent of Harlequin’s hotels. This means that any monies received by Harlequin Property were duly passed to the overseas companies to build and run the resorts, minus commission.
“The overseas companies have not entered into any insolvency procedure. Therefore any valuation based upon Harlequin Property’s administration process is both arbitrary and highly questionable.
“It is unfortunate that such communications, which result in unnecessarily worried investors, are not brought to our attention before publication.
“We assure our investors that Harlequin is committed to developing its hotels and building investors’ properties, and are buoyed by yesterday’s landmark decision in the Irish courts, which vindicated our claims against previous contractors.”
A spokesperson for the FCA said: “Investors in Harlequin will understandably be concerned about the current value of their investment. In order for Sipp firms to keep savers informed, we have indicated that they should take a prudent approach to valuations – this will help prevent misleading consumers, and risks to their pension benefits.
“We have not said that the investment must be valued at £1; how each firm values the investment is up to them.”
