FCA investigates 33 advisers over Sipp investments

FCA investigates 33 advisers over Sipp investments

The Financial Conduct Authority (FCA) has 33 open investigations into advisers the watchdog suspects have given poor advice to transfer into a self-invested personal pension (Sipp).

In a letter to Frank Field, the chairman of the Work and Pensions select committee, Megan Butler, the FCA’s director of investment, wholesale and specialist supervision, said the watchdog is "considering what action to take in each case".

She also revealed the regulator has already prohibited four advisers and banned another from holding a senior position as a result of its investigations in this market.

Ms Butler said so far the regulator had referred two Sipp operators to its enforcement and market oversight division, a procedure which is triggered when the FCA finds serious failings.

The watchdog also has an ongoing skilled person review into a Sipp provider relating to the due diligence performed when accepting a non-standard investment, she added.

Ms Butler also revealed that the total of non-standard investments held by Sipp providers reached almost £6bn as of September 2017.

This figure represents approximately 2 per cent of the total of £300bn of assets under management with the largest contract-based Sipp providers, and is below the total amount withdrawn from DB schemes during last year, of £22.4bn.

Ms Butler said the FCA isn’t considering barring unregulated or non-standard investments from inclusion in Sipps.

She said: "We believe suitable advice from financial advisers accompanied with effective due diligence checks by Sipp operators is a more proportionate way of preventing harm to consumers rather than imposing a ban."

She also argued that it was important to note that not all unregulated or non-standard investments were high risk.

Ms Butler said: "Some investments are deemed non-standard because they aren’t capable of being liquidated within 30 days.

"Commercial property and fixed term deposit accounts are key examples of this. We wouldn’t necessarily want to ban sophisticated and high net-worth individuals from making these investments should they wish to, based on sound advice and consideration."

Mr Field had written to Ms Butler in May questioning the FCA’s regulation of Sipp providers, saying it wasn't clear what repercussions these firms would face if they flouted the watchdog's rules.

He asked several questions about Sipp products, after the committee found them to be "the primary vehicle used by unscrupulous advisers to channel individuals’ pension savings into unsuitable investments" during its investigation of defined benefit (DB) transfers.

FTAdviser reported recently that the FCA is going to argue providers have a duty to vet investments before they can enter their Sipp, in a court case this autumn.

In documents submitted by the regulator to the Sipp provider Berkeley Burke's judicial review, the FCA argues acquiring the assets in a Sipp forms part of operating the Sipp.

As such, under section 22 of the Financial Services and Markets Act 2000 establishing and operating a Sipp as well as buying and selling securities are regulated activities, therefore Principles 2 and 6 apply.