Claims to head to FSCS as £26.7m Sipp firm fails

Claims to head to FSCS as £26.7m Sipp firm fails

The Financial Conduct Authority has ordered a Sipp provider to inform its clients that it accepted business from unauthorised introducers without proper vetting and would now be placed in insolvency.

In a second supervisory notice published yesterday (August 24), the FCA said DAC Pensions, which is a self-invested personal pensions operator, failed to carry out adequate due diligence checks on two EEA introducer firms prior to accepting business from them. 

The firm has been ordered to write to clients informing them of this failure while also letting them know that it will be unable to deal with any resultant complaints and would be put into liquidation, meaning clients can bring their claims to the FSCS.

DAC Pensions is a small Sipp operator that has been authorised by the FCA since September 2017. It has 697 clients and administers assets of £26.7m.

In its second notice, dated July 1 but published yesterday (August 24), the FCA said between December 2017 and July 2019, the firm accepted approximately 620 new clients from two introducers based in Ireland and Cyprus which were passporting into the UK but did not have the required top-up permissions to give pensions advice in the UK.

DAC Pensions was administering assets of £20.4m for these clients. Typically, introducers 1 and 2 advised clients to transfer their pensions into a Sipp operated by the firm and to invest in high risk assets via a model portfolio managed by them. 

The City watchdog said a number of these investments were unregulated collective investment schemes based overseas and unlikely to be suitable for retail clients. 

A number of these Ucis have also been unable to meet redemption requests for a significant period which could see customers lose some or all of their money.

The FCA said the firm had also failed to communicate redemption issues relating to the Ucis to its customers in a timely manner.

Assets will now be liquidated and returned to clients but the letter from DAC Pensions, as specified by the FCA, also tells clients to bring their complaints to the FSCS.

The letter, reads: "We should not have accepted your pension and you have a right to complain to us. However, as DAC
is to be placed into liquidation and declared in default, the steps you need to follow if you have a complaint have changed.

"DAC is covered by the Financial Services Compensation Scheme (FSCS). The FSCS protects consumers when authorised firms fail and can pay compensation of up to £85,000.

"As such, once the FSCS declares DAC to be in default, you should make a claim to the FSCS for any losses incurred with your pension as a result of moving it to DAC. You will be given more details about this from Quantuma."

The two introducers are not based in the UK and are therefore not subject to the Financial Ombudsman Service’s jurisdiction or the Financial Services Compensation Scheme. 

However, DAC is covered by the Financial Services Compensation Scheme.