Financial Ombudsman Service  

Tenet to pay out for Sipp advice

Tenet to pay out for Sipp advice

The Financial Ombudsman Service has ordered TenetConnect to compensate a client who was unsuitably advised to switch his pension by one of its appointed representatives. 

The client was first introduced to the appointed representative by a loans company which subsequently lent him money to invest in unlisted securities. 

The appointed representative advised the client to switch his personal pension to a self-invested personal pension with SVS Securities, which recently entered administration after the Financial Conduct Authority conducted "urgent" supervisory work at the firm, and a total of £20,321 was invested in SVS, Guardia and Titanium International. 

In a decision published in July the ombudsman found one of these companies, SVS, had now failed and the other two had "significantly fallen in value". 

When the client complained to Tenet about the adviser, who he believed had mis-sold the Sipp and bought too many shares in the companies without proper due diligence, the network said it had no knowledge of the advice provided by its appointed representative.

Tenet maintained no paperwork associated with regulated financial advice existed and it had not received any commission - it also argued neither the SVS Sipp nor the unlisted securities products approved by Tenet and its appointed representatives were only authorised to advise on approved products.

But the ombudsman ruled in favour of the client despite Tenet's objections, finding the company was liable for the unsuitable advice provided by its appointed representative regardless of whether part of it technically fell outside of the network's responsibilities. 

Despite acknowledging the advice process was "not well documented" ombudsman Michael Stubbs said it was "more likely than not" that the appointed representative had advised on the pension switch because the adviser was paid a fee of £1,000 for his part in helping the client take out the Sipp and was listed as the client's adviser on the supporting application. 

Mr Stubbs agreed neither the SVS Sipp nor the unlisted securities were products Tenet had authorised its appointed representatives to advise on and therefore advising on these products fell outside of the authority granted to the adviser. 

But the ombudsman ruled the original advice for the client to surrender his existing personal pension policy did fall within the authority granted by Tenet, and that the two pieces of advice were so closely linked as to bring the entirety under the responsibility of the network. 

The ombudsman's decision followed a ruling by the High Court in a case involving Tenet that if a piece of regulated advice and unregulated advice were "inextricably linked" they could be constituted as a single piece of regulated advice. 

Mr Stubbs said: "As I said earlier the client was advised to switch his personal pension to a Sipp and to then invest in unquoted shares. The whole purpose of the advice was to enable the client to purchase the shares.

"Without the purchase of the shares the loan that the client was looking to obtain would not have been forthcoming. I therefore consider that the various elements of this advice are inextricably linked – without the pension switch there would have been no share purchase.