The Financial Conduct Authority (FCA) has started a probe into the advice given to savers with self-invested personal pensions (SIPPs) following high profile court cases against providers Berkeley Burke and Carey Pensions.
In a letter the regulator has asked them for information about their business activities and their expectation of the way the providers handle their due diligence obligations when accepting investments.
The Berkeley Burke case involved a long-standing dispute with the Financial Ombudsman Service (FOS) over the duty of care in vetting unregulated investments for clients.
The judicial review resulted in clarification of the rules regarding the due diligence which providers need to carry out before recommending a product to their client.
A FOS spokesman said: “The court has now determined whose responsibility it is as to what due diligence requirement a SIPP provider needs to make before accepting the investments.
This clarity can only be a good thing for industry.”
Berkeley Burke are appealing the decision, but the FCA is requesting a range of information from SIPP providers including their professional indemnity insurance cover, if the firm has sufficient capital to meet regulatory financial obligations now and in the future and if firms sought professional advice regarding solvency or viability of the business in the last six months.
1,000 SIPP complaints
FOS has revealed it has received 1,000 complaints in relation to the duties and responsibilities of SIPP providers.
A spokesman said: “We received around 1,000 complaints this calendar year about Sipp provider responsibilities.
Some of these cases are quite complex and involve many different parties.
“We are progressing cases in line with our statutory duty and each complaint will be decided on its particular facts.”
They also revealed the top five ‘alternative’ investments they have received complaints about in the last year:
- Truffle trees – where funds were used to buy a number of trees whose roots are sprayed with a chemical to encourage the growth of truffles between the tree roots.
- Sunken treasure – shares are bought in a business that traces sunken shipwrecks in the hope of recovering treasure.
- Cambodian bio-fuels – plots of land in Cambodia were bought so that Jatropha trees could be grown to produce bio-fuels.
- Burial plots – purchasing burial plots, with a promised return on investment when the plot is later sold.
- Whiskey – an investment in maturing and appreciating whiskey, with a promised return on investment when the whiskey is later sold.