A recent Financial Ombudsman Service (Fos) ruling against a Sipp provider that accepted business from an unregulated introducer could see swifter settlements being reached rather than providers risking their necks in the court, lawyers have claimed.
FTAdviser reported last week that a Fos adjudicator ordered Sipp provider Guiness Mahon to compensate a client who invested in a high-risk investment after being recommended the deal by an unregulated introducer.
The complaint was made to the ombudsman by solicitors Anthony Philip James & Co (APJ), acting on behalf of a client who saw his investment in Ethical Forestry destroyed by a hurricane.
The law firm 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.
Guinness Mahon has been approached for comment.
Glyn Taylor, solicitor at APJ, told FTAdviser that the firm has received another similar preliminary decision from the Fos, with the same outcome and that these two rulings mean Sipp providers who accepted business from unregulated introducers could now quickly settle similar complaints.
The firm is representing around 100 claimants, all regarding similar unregulated high-risk investments, made with the same introducer.
The total invested by APJ clients with Guinness Mahon is £7.73m.
Simon Laight, a partner at law firm Pinsent Masons, said if there is an increasing inflow of adjudicator recommendations around a common set of circumstances, that might influence how the firm's professional indemnity insurers handle the claim.
He said: “Publicising the adjudicator's recommendations is litigation tactics. It brings pressure on the firm and its insurers.”
Neil Stockdale, partner and head of group actions and financial mis-selling at law firm Hugh James, said the Fos preliminary decision on Guinness Mahon wasn’t a “huge surprise”.
He said: “It indicates how the Fos are thinking, and there are a lot of these cases which could proceed in a similar way.
“The issue about the responsibility of a Sipp provider in this sort of circumstances hasn't been grappled by the courts yet.
"There is no legal decision on it.”
Pinsent Mason's Mr Laight agreed there is still little guidance and understanding of how a Sipp operator should be going about meeting its obligations to safeguard the interests of customers and treating them fairly.
He said: "We should be getting some guidance from the court case on Carey Pensions.”
In Adams vs Carey Pensions case, which was heard in late March and is currently awaiting judgement, the court heard claims from an investor that a Sipp provider had colluded with an unregulated introducer to push retirement savers into high-risk unsuitable investments, where they lost as much as £3m.
Mr Laight said: “I think it is a weird situation whereby Sipp operators, which are there essentially to administer investment vehicles, are finding themselves in the position of being responsible for consumers' financial decisions.”
But according to Martin Tilley, director of technical services at Dentons, not all unregulated introducers are bad.
He told FTAdviser: “We receive business introduced to us sometimes through accountants, or surveyors who have clients who want to buy a commercial property.
“From that perspective, I wouldn't say that we don't accept business from unregulated intermediaries, what I would say is that we don't accept any business from intermediaries proposing a non-standard asset.”
But Sipp provider AJ Bell has a different view.
Senior analyst Tom Selby said: “We have our main adviser-focused Sipp, which was set up on day one on the basis that an [Financial Conduct Authority] FCA-regulated, UK-based adviser has the control of a Sipp of an individual customer.
“We also have a direct-to-consumer SIPP (through AJ Bell Youinvest) that operates on an individual customer basis.
“Unregulated introducers don’t fit into either of those propositions.”
According to Craig Harrison, managing director at Creative Wealth Management, if Sipp providers have knowingly taken business from unregulated introducers and put client’s money into (often) illiquid and unregulated vehicles then "they are on a sticky wicket."
The FCA revealed last week that it has referred two Sipp operators to its enforcement and market oversight division, a procedure which is triggered when the regulator 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.
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, also revealed that the regulator has 33 open investigations into advisers the watchdog suspects have given poor advice to transfer into a Sipp.
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.
maria.espadinha@ft.com
