Page 44 - DIY INVESTOR MAGAZINE - NOVEMBER 2018
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      WHY DIY INVESTORS WILL PAY THE PRICE FOR PENSIONS PROTECTIONS
 FCA warns of closures after beleaguered SIPP provider Berkeley Burke loses its judicial review in a landmark High Court ruling following a long standing dispute with the Financial Ombudsman Service – writes Christian Leeming.
Reporting on the ruling between Berkeley Burke SIPP Administration and the Financial Ombudsman Service (FOS) which established with greater certainty whether SIPP providers have a duty of care to vet unregulated investments for their clients, The Sunday Telegraph said that ‘up to a million’ SIPP-holders will be affected putting pension providers ‘on the hook’ for customers’ investments.
In the ruling, Judge Jacobs says that asking a SIPP provider to check an investment in a foreign country is simply an application of existing due diligence requirements.
Legal representatives for the claimant Berkeley Burke contended that FOS’s decision was legally incorrect but a spokeswoman for the ombudsman told Money Marketing: ‘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 posited that the FOS ruling misapplied conduct of business rules to SIPP providers and could create due diligence obligations for them retrospectively. Representing FOS, the defendant in the case, QC James Strachan told the court that asking a SIPP provider to check an investment in a foreign country is an application of existing due diligence requirements.
Judge Jacobs sided with FOS’s argument and says:
‘I do not accept that the Ombudsman, in his decision, was creating a new rule at all. His approach was simply to identify the existing rules, specifically the principles, which had been consulted upon, and then to decide how those rules applied in the context of the particular facts before him. This is apparent from the decision as a whole.’
In 2011 a client, known as Mr Charlton, invested his money into plots of agricultural land in Cambodia via a Berkeley Burke SIPP.
In 2014, FOS ruled against Berkeley Burke for failing
to carry out adequate due diligence on the £29,000 unregulated collective investment scheme; the provider has confirmed that it will appeal the decision.
In response to the ruling, the Financial Conduct Authority has written to the CEOs of other SIPP providers to remind them of their regulatory commitments following the outcome of the case.
The letter from FCA chief executive Andrew Bailey asked firms to consider the ‘potential implications’ of the ruling; he urged providers to notify the FCA immediately if the outcome of the case called into question firms’ ability to meet financial commitments.
He wrote: ‘If the outcome of any of these cases calls into question your firm’s ability both now and in the future
to meet its financial commitments as they fall due, you must notify the FCA immediately. Where relevant, firms should also notify claims to their professional indemnity insurers in accordance with their policies.’
‘WE RECOGNISE THAT IF A FIRM MAY NOT BE ABLE TO MEET ITS FINANCIAL COMMITMENTS, IT MAY BE IN THE INTERESTS OF SOME OF ITS CUSTOMERS FOR PART OR ALL OF ITS BUSINESS TO BE SOLD TO ANOTHER FIRM’
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