Regulation  

FCA enforcement on Sipps due diligence looms

Several self-invested pension firms have been told by the regulator to suspend supporting non-mainstream investments as it finalises its third thematic review in the sector, which some have said is likely to lead to enforcement action against a number of providers.

Speaking to FTAdviser, two members of the Association of Member-directed Pension Schemes said that the FCA’s third thematic review, alongside its long-awaited capital adequacy paper, will be published at the end of June.

Both said the FCA had revealed during discussions that it continues to find failings within Sipp firms, especially relating to esoteric investments.

Article continues after advert

According to Neil MacGillivray, Amps’ chairman and head of technical support unit at James Hay, the FCA has told some Sipp firms not to deal with certain investments that are non-mainstream, which he said was likely to be due to due diligence being “not up to standard”.

He said: “We know that some Sipp firms have been asked not to deal with certain investments that are non-mainstream - they have just been told not to do it.”

Zoe Smith, a member of the compliance sub-committee at Amps and compliance officer at Barnett Waddingham, added that she was aware the FCA had found a range of failings in its review thus far.

She said: “We are aware that some of the findings they have made are not what they would have hoped but we are not aware of what action will be taken as a result.

“They did tell us that some there are still some failings within firms but they weren’t specific as to what it refers to.”

Other sources have suggested that the failings would lead to enforcement action being taken against a number of firms.

Prior to the FCA’s second thematic review in October 2012, specific reference was not made to due diligence. In October 2013, FTAdviser revealed the regulator had launched a third thematic review into Sipps.

The thematic review focused on Sipp operator financial resources, the quality of business Sipp operators allow within their schemes and “operational procedures and controls”.

Mr MacGillivray pointed out that as the FCA refuses to be prescriptive in exactly what it wants from firms’ due diligence, it is proving to be a “learning curve” for Sipp firms as to what the regulatory expects. The FCA relies on its principles of business, he added.

Mr MacGillivray said: “Even amongst our members, there is a big variance between what firms do and that is the issue.

“This is why the outcome of the thematic review will be particularly interesting. We will just have to step back and see what the outcome is. We know certain firms have issues and problems... if it’s really bad they will strip them off their permissions and the industry will know straightaway.”

The FCA confirmed the findings are expected to be published in June, but did not comment on any findings.