The Financial Conduct Authority has warned Sipp providers about the number of consumers reporting due diligence concerns to the Financial Ombudsman Service.
In a dear CEO letter to Sipp providers, published on Friday (May 12), Lucy Castledine, interim director of consumer investments at the FCA, said although in the past three years firms have been “working hard” there are still a number of problems, particularly relating to historic issues.
“Our concerns have been heightened by more firm failures, often after Fos decisions have identified failings, and we are now seeing more complex Sipp operator administrations,” she said.
The issues highlighted by the FCA included firm failures causing disruption of service for consumers, or additional costs being passed onto consumers, as well as clients not receiving a fair redress when it is due, particularly when firms have failed to conduct adequate due diligence.
You are responsible for ensuring that your firm meets FCA requirementsLucy Castledine, FCAThe FCA also highlighted the continuing number of pension scams and fraud, as well as consumers being allowed to make investments that should not be accepted in their Sipp (including assets which fail, become illiquid or lose all or most of their value).
“There is therefore an even greater need for you and your firm to ensure standards of conduct are high, including ensuring appropriate systems and controls, and operational and financial resilience are in place – as well as preparing for the additional requirements that the consumer duty will bring,” Castledine said.
To tackle these issues, the FCA said it expects Sipp providers to proactively identify consumers who are due redress and ensure they receive it promptly, as well as taking into consideration guidance and recent Fos decisions when determining their approach in handling due diligence complaints.
You should undertake remedial actions if shortcomings are identifiedLucy Castledine, FCAThe regulator said firms should also take whatever steps are necessary to meet the requirement to act in good faith towards consumers where complaints or other “root cause analysis” highlights systemic issues.
“You should consider your firm’s systems and controls against these findings and undertake remedial actions if similar shortcomings are identified,” Castledine said.
Providers were reminded that they should make sure they are taking “robust” due diligence on intermediaries, assets and third parties, which includes ongoing monitoring.
They are also expected to consider the incoming consumer duty as part of their due diligence processes, and to have effective oversight of introducers, with further scrutiny of any unregulated introducers to avoid foreseeable harm to consumers.
Finally, clients should be informed about any issues so they can take appropriate action.
The regulator will make use of the senior managers & certification regime to engage directly with accountable individuals over areas of concern, and it is planning to focus on firms where there are indicators or evidence of failings related to any of the points mentioned in the letter.
“You are responsible for ensuring that your firm meets FCA requirements including the obligations and expectations set out above,” Castledine said.
“You should take all necessary action to ensure these are met and that you are prepared for the additional requirements that the consumer duty will bring to these areas of priority.”
sally.hickey@ft.com
