Ombudsman rejects esoteric James Hay Sipp complaint

The pensions ombudsman has not upheld a group action complaint against James Hay Partnership who alleged the Sipp firm did not carry out due diligence to ensure their esoteric investments were executed properly.

In particular, the 11 applicants contend that James Hay Partnership did not check that their investment instructions had been implemented correctly by obtaining contract notes/documents for all their overseas investments and also did not supply them with current valuations for the IPS Sipp.

In a recently published pensions ombudsman decision, Tony King said James Hay Partnership fulfilled their “limited obligations” under IPS Sipp and are not responsible for losses suffered by the 11 applicants.

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The applicants were advised by P Ronald, an authorised representative and director of Helmlake Financial Services Ltd (until September 2010) and who is now listed as inactive on the FCA register, to transfer their existing pension rights into the IPS Sipp between September 2007 and June 2010.

They were advised to purchase unquoted notes in overseas property companies with investments in Dubai, Cyprus, Turkey, Hungary and Spain. James Hay Partnership received certificates of incorporation and/or articles of association for these overseas property companies. Share certificates/contract notes were not issued for these investments by the providers at the time.

The unnamed companies later got into financial difficulties. Mr King added there is little prospect of any recovery of the applicants’ funds.

In 2011, James Hay Partnership tried to obtain some of the contract notes/ documents for the investments made after being compelled by the applicants’ current IFA to do so.

However, most of the applicants joined the IPS Sipp before 1 June 2009 when it was known as the PAL Sipp. The PAL Sipp documentation did not state that James Hay Partnership would be responsible for ensuring that the investment providers supplied the contract notes/documents confirming ownership of the chosen investments.

It was only in the later IPS Sipp documentation that James Hay Partnership first said that they would forward contract notes and documents showing ownership of investments as soon as practicable after receipt. The IPS Sipp documentation did not state however that James Hay would actively chase the investment providers for contract notes/documents if they were not provided automatically or on request.

As a gesture of goodwill towards the applicants, James Hay Partnership are prepared to pay each of them £100 compensation on the basis that they might on reflection have kept them better informed of any correspondence which they had with the providers about their investments

Mr King said: “In any case, there is no link between the lack of contract notes/share certificates and the subsequent failure of the corresponding overseas investments.”

This follows from a recent Pensions Ombudsman ruling where a complaint against Standard Life over an apparent failure to undertake sufficient due diligence in relation to Arm life settlements bonds investments in 2009 was not upheld.

However, deputy pensions ombudsman Jane Irvine pointed to tougher regulation that has been in place since 2012 against the provider.