Fos rules provider should’ve rejected introducer's business

Fos rules provider should’ve rejected introducer's business

An adjudicator at the Financial Ombudsman Service (Fos) has upheld a complaint regarding a high-risk investment made with self-invested personal pension (Sipp) provider Guinness Mahon.

The complaint was made by solicitors Anthony Philip James & Co (APJ) on behalf of a client, which saw its investment in Ethical Forestry destroyed by a hurricane, and demanded a refund of his £13,000 investment.

The Fos adjudicator concluded that Guinness Mahon should have refused the introduction of business, because the firm was aware the client was given advice by unregulated introducer Avacade, which cold called the claimant for a free pension review in 2014.

The client transferred its Phoenix Life pension, worth £13,661, into the Sipp on December 2014.

In January 2015, £12.324 was invested in Ethical Forestry, with the remainder of the funds used to cover fees.

The unregulated scheme, which aimed at providing returns through the growth of tropical woodland in Costa Rica, is currently under investigation by the Serious Fraud Office (SFO), the adjudicator said in his decision.

The adjudicator concluded that Guinness Mahon didn’t perform sufficient checks regarding Avacade’s work – which according to the decision was “likely providing advice, carrying out a regulated activity when it wasn’t authorised to do so”.

The Sipp provider has been ordered to compensate the client by comparing the notional transfer value of the complainer previous pension plan and the actual transfer value of the Sipp.

Guinness Mahon will then need to pay a commercial value to buy the assets of the client in the Sipp, and pay the claimant £300 for the distress caused.

The Sipp provider has been approached for comment on the ruling and has the opportunity to appeal the Fos decision.

According to Glyn Taylor, solicitor at APJ, this preliminary decision “is consistent with the Financial Conduct Authority’s view that Sipp operators should not accept high-risk, illiquid investments in a Sipp as they are manifestly unsuitable as a pension investment”.

The firm is also representing other clients which submitted claims against Guinness Mahon.

These relate to investments between 2013 and 2016, in unregulated schemes such as Ethical Forestry and Global Plantations. The claims have been submitted and accepted by the courts.