Report: Key UK case could see SIPP provider held liable for adviser’s ‘unsuitable advice’

A case now being referred to a senior figure at the Financial Ombudsman Service could have implications for UK-regulated pension fund providers that hold the pensions of individuals who can show that they took out those pensions on the basis of inadequate advice, a published report reveals.

According to the report, which appeared in Saturday’s Times of London, the FOS ruled in August of last year that a retired Boots manager from Reading – who had been deemed to have been advised to move his final salary company pension scheme to an unauthorised Australian property fund that was held in a SIPP – should be returned “to the position he would have been in but for the ‘unsuitable advice’”.

The property fund in question was administered by LM Investment Management, a Queensland, Australia-based, Australia Securities & Investments Commission-regulated fund manager which collapsed in March, 2013, causing massive losses for thousands of investors, particularly in the offshore world.

The FOS said the SIPP administrator in the case, Brooklands Trustees, should pay Stewart Rowe the maximum award of £150,000, although this would still leave him out-of-pocket by £110,000 from the £260,000 value of his pension, The Times said.

“The ombudsman concluded that if Brooklands had conducted adequate due diligence on FCP [Insurance Consultants, a Cyprus-based financial advisory business not regulated to offer advice on pensions in the UK], and the SIPP being proposed, the transfer should not have come about, and it is reasonable to assume that Mr Rowe would have remained in the Boots final-salary pension scheme,” The Times report added.

In October Brooklands’ lawyers responded to the ruling by rejecting its conclusion, “arguing that it had made sufficient checks”. (As the Times article noted, Brooklands had originally “spotted that FCP was not regulated to provide pensions and investment advice, and rejected Mr Rowe’s application” initially, but FCP then “formed a relationship with a UK-regulated company” in order to see to it that the pension transfer went ahead”.)

Following the Brooklands’ response, the matter was then moved into the FOS’s referral pipeline, according to The Times.

Meantime, in the same month (October 2015), according to a published report at the time, Brooklands announced that it was to change its name to IVCM, close its SIPP in the UK and launch a new SIPP “in partnership with specialist provider Heritage Pensions”.

It said the SIPP would be marketed under the name IVCM, and would be available for standard investments only.

Paul Evans, a director of Brooklands and group chief executive of IVCM, noted that the “current ruling is a preliminary injunction” and that it is company policy “not to discuss inividual customer complaints while they are the subject of ongoing consideration or proceedings”.

FCP Insurance Consultants could not immediately be reached for comment, as phone numbers said to be the company’s weren’t answered. Universal Wealth Management also was not immediately available for comment, although The Times said a company executive named Ray Simpson said he had “never met Mr Rowe, and neither I nor Universal Wealth Management have given him any financial advice”.

‘Could be a game-changer’

A solicitor who has been involved in helping the out-of-pocket pensioner, ex-Boots manager Rowe, said that the final ruling in the case “could be a game-changer” for others who have lost money in SIPPs who can also claim they were badly advised.

“But it’s quite fact-specific,” the solicitor, Tim Hampson, of Neglect Assist, added, noting that the case involved “a firm based and regulated in Cyprus” – thus beyond the regulatory oversight of the UK’s Financial Conduct Authority – “and also, the UK-based company that had the relevant permissions never actually advised Mr Rowe”.

“But as far as putting down a marker, to the effect that the Ombudsman appears to be taking a firmer approach to regulation [of the SIPP market] than it perhaps did in the past, yes, it could be… a big decision”.

According to the Financial Conduct Authority’s website, FCP Insurance Consultants was FCA-regulated prior to 15 November, 2013. On 28 November of that year, the regulator posted a notice stating that from 15 November, “the firm can no longer sell insurance in this country and it is not allowed to provide any other regulated financial services in the UK”.

The FCA statement noted that FCP Insurance had permission under EU law “to sell insurance only in the UK, until the Ministry cancelled its UK permission earlier this month”.

As reported,  many of the investors in the LM Investment Management fund, in which Rowe had been advised to place his pension, are expats living in Thailand, who have joined forces in order to seek help from that country’s regulator in getting their money back.

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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