Financial Ombudsman Service  

Hundreds of claims in pipeline as Rowanmoor loses Sipp case

It had further been "strongly recommended" to him that, before buying the property, Mr T take appropriate legal and other professional advice, and confirm in writing to Rowanmoor if he declined this. 

Rowanmoor argued it had limited and specific due diligence obligations with regard to the business it accepted from CIB. 

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Regulatory obligations

Rowanmoor cited high-profile Sipp case Adams v Options Sipp (formerly Carey pensions), in which the High Court dismissed the claim that the Sipp provider had breached COBS 2.1.1R (A firm must act honestly, fairly and professionally in accordance with the best interests of its client) by taking Mr Adam's high-risk business. 

Mr Justice Dight had found Options Sipp had complied with the best interests rule in that case. The Court of Appeal then rejected Mr Adams’ appeal on the grounds the case was fundamentally different to the originally brought one.

But the Fos said Rowanmoor and Options' cases were based on different claims and could not be compared. 

The crux of the Options ruling, and one that Rowanmoor tried to argue in its own case, was that the contract between a Sipp operator and the client was highly relevant in determining the Sipp operator’s duties - in this case it was an execution-only relationship in which Rowanmoor had warned the client about the risks of the investment.

The provider's lawyers argued the Fos relied too much on the FCA principles to the exclusion of the firm's obligations under COBS.

But the Fos said the FCA principles never formed part of the pleadings in Adams v Options and as such the judge did not consider them. In the present case, however, they could not be ignored. 

It said the principles for businesses, which are set out in the FCA’s handbook, were "a general statement of the fundamental obligations of firms under the regulatory system".

In particular the ombudsman considered principles two, three and six, which say a firm must conduct its business with due skill, care and diligence; a firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems; and a firm must pay due regard to the interests of its clients and treat them fairly.

The fact that Rowanmoor was not authorised to give advice didn’t preclude it from meeting its regulatory obligations by thinking carefully about the quality of the business it was accepting, he said. 

But the ombudsman clarified the case was not about whether or not Rowanmoor should have provided advice to the client on the Sipp or underlying investment, it was about its relationship with CIB.