Pensions Ombudsman Tony King has backed a self-invested pension provider over a controversial ongoing dispute related to due diligence of unregulated investments, in a ruling which goes against a decision of the Financial Ombudsman Service last year.
Last year, Berkeley Berke lost a case at the Fos over an unregulated investment in a landmark ruling that some interpreted as meaning Sipp operators would need to undertake adviser-style due diligence.
The Fos later U-turned when further evidence came to light and has said it is now reviewing the decision afresh. Questions remain over whether this new decision will be binding as the claimant had already accepted the original ruling.
Fos’s original decision, which was published on its online database but was later removed, ruled the firm had failed to carry out adequate due diligence by allowing a consumer to invest £24,195 in Green Oil Plantations in 2011 and £58,500 in Harlequin.
However, a recently published decision by the Pensions Ombudsman revealed an opposing view.
Mr King did not uphold investor Michael Beasley’s complaint, ruling that the Berkley Burke complied with their obligations, gave him clear warnings and explained they would not be liable for losses in the particular investments that he chose.
Mr Beasley’s complaint was that Berkley Burke failed to carry out due diligence into his investments, despite the fact that he chose them.
When he opened the Sipp in 2011, Berkeley Burke sent him a letter stating they would not be held responsible for any losses or liabilities that might arise from his investment decisions, which he signed.
The Sipp provider also told him that an acceptance of an investment onto the Sipp “does not mean we endorse the investment, nor it’s [sic] suitability to meet your own financial objectives or investment risk profile”.
Prior to 2009, Sipps were unregulated investments and in 2009, the regulator published a number of recommendations that Sipps providers should adhere to following a thematic review.
The review recommended that Sipp providers should monitor and “bear some responsibility” for the quality of business introduced to them; be responsible for the compliance aspects of individual Sipp advice; routinely record and review the type and size of investments recommended by advisers; and request copies of suitability reports.
However, as Mr Beasley did not take financial advice, the “basic checks” undertaken by Berkeley Burke were sufficient to meet the requirements imposed on them by the regulator and HM Revenue and Customs for such investments, Mr King found.