Financial Conduct Authority  

FCA warns Sipp providers to own up to financial struggles

FCA warns Sipp providers to own up to financial struggles

The Financial Conduct Authority has renewed its warning to self-invested pension providers about their responsibility to carry out proper due diligence when accepting investments, in the wake of Berkeley Burke dropping its appeal case.

Last week (October 4), the administrators of the Burkeley Burke Sipp dropped the appeal case scheduled for this month after they failed to get sufficient backing to cover the potential cost.

Berkeley Burke has been fighting a Financial Ombudsman Service decision from 2014 which ordered it to compensate a client after it failed to carry out adviser-style due diligence on his investment.

In February 2019 the Court of Appeal granted Berkeley Burke permission to appeal a High Court ruling after it sided with the Fos, claiming the decision was potentially one of "considerable and wider importance within the industry and for customers".

Following confirmation that the appeal will not go ahead, the FCA issued a statement reminding Sipp providers of their duties to ensure proper due diligence is carried out on clients’ investments before they are accepted.

It also reiterated the importance of its Dear Ceo letter, published in October 2018, which set out a number of cases against Sipp providers over their due diligence failings.

The letter pointed out that if a Sipp firm cannot meet its financial commitments it may be in customers' interest for all or part of its business to be sold to another firm.

But it warned firms to consider compensation claims when selling part or all of their business assets.

In the statement (published October 4) the FCA said: “We reiterate that if the outcome of this case calls into question a Sipp operator’s ability to meet financial commitments as they fall due, they should contact the FCA immediately. 

“We also remind firms of their obligations to treat complainants fairly and handle complaints according to the rules set out in the Dispute Resolution Handbook.”

The regulator warned that firms must ensure that appropriate redress is given to clients that have been disadvantaged by the Sipp provider in any way.

The FCA said: “Where a firm receives an ombudsman decision, it should, in accordance with Principle 6, consider whether it ought to act with regard to the position of customers who may have suffered detriment from, or been potentially disadvantaged by, such problems but who have not complained and, if so, take appropriate and proportionate measures to ensure that those customers are given appropriate redress or a proper opportunity to obtain it.”

The FCA is also cracking down on directors and will take into account how individuals have acted in the context of the “Dear Ceo” letter when giving permissions in the future, it stated.

The regulator said: “In assessing any future regulatory applications, including applications for individuals to hold (or resume holding) FCA-approved roles, we will take into account how those individuals have acted in the context of the considerations outlined in our letter.”

Berkeley Burke’s Sipp business entered administration last month after it could no longer afford to defend redress claims made against it in respect of alleged due diligence failings when accepting high risk investments between 2010 and 2012.