The Financial Conduct Authority (FCA) has requested information from self-invested personal pension (Sipp) on their non-standard investments.
According to a letter sent to providers in September seen by FTAdviser, the watchdog is also asking for data on these assets held within discretionary portfolio management (DFM) services, in order to have a better overview of the market.
The FCA will also use the information to help inform any decisions on whether it wishes to undertake further supervision work within this area.
Sipp providers will have to disclose details of financial advisers that advised their clients to invest in non standard investments, and those that submitted business on an execution only or insistent client basis.
The companies are also asked to report on esoteric investments that were made through an unregulated introducer.
The FCA’s definition of an non standard investment is one that falls outside what most retail customers would usually invest in.
This is likely to include unlisted bonds, unregulated funds, unlisted company shares, intellectual property and any property that cannot be sold within 30 days.
It is the second time in two years that the FCA has asked Sipp providers to answer questions on non standard investments.
In 2015, the watchdog had the goal of identifying which advisers are placing clients’ investments in these assets.
Sipp providers and advisers have become extremely wary of what the regulator terms 'non-mainstream' assets, after a serious of high-profile problems for unregulated investments such as Harlequin, Connaught and Stirling Mortimer.
The compensation paid to investors via the Financial Services Compensation Scheme (FSCS) who were holding their pensions in Sipps went up by 35 per cent to £105m in 2016/17.
The FSCS’s annual report said of the Sipp-related claims increase: “These investments are often high risk and unsuitable for most investors. Their riskiness means some investments inevitably fail and become illiquid.
“This trend began two years ago and has continued this year, with claims against an increasing number of failed life and pensions advisers.”
Sipp administrator Talbot and Muir has welcomed FCA’s action on this matter, and is calling for open and full disclosure of a firm’s exposure.
According to Brian Talbot, director at Talbot and Muir, Sipp providers “should openly disclose their exposure to non standard investments and in particular their concentration in one or more individual investment”.
He said: “This combined with a clearer definition of non mainstream investments from the FCA would help advisers to understand the makeup of a Sipp operators book of business and enable full and accurate due diligence to be undertaken”.
The information being requested by the FCA is due back by 25 October.
maria.espadinha@ft.com
