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FSCS puts 3 SIPP operators in default

21 January 2018

The Financial Services Compensation Scheme (FSCS) has declared three SIPP operators in default, on the basis that they are unable or likely to be unable to satisfy protected claims against them.

This follows the FCA highlighted concerns in the SIPP market relating to due diligence failings.

The FSCS has received approximately 150 claims against these firms.

The claims relate to the way in which the three firms – Brooklands Trustees Limited, Stadia Trustees Limited and Montpelier Pension Administration Services Limited – established, operated and administered SIPPs, through which consumers invested in non-standard investments.

The FSCS reports that many of the investments were higher risk such as oil investments, foreign hotel room investments and foreign vineyard investments “and made by consumers with little investment experience and modest funds to invest”.

In addition, “often, the investor was not actively looking for alternative pension investment opportunities but made the investment following a cold call by an overseas introducer who referred the consumer to the SIPP operator on a non-advised basis.”

In some instances, investors transferred all or the vast majority of their existing pension from an occupational pension scheme into the SIPP.

The FSCS added that many of the underlying investments held via the SIPPs are illiquid and have little or no current value resulting in consumers having lost a substantial portion of their pension pot.

Instances of SIPP operator failures included:

• Failing to carry out any due diligence on the underlying investment held in the SIPP.

• Receiving information that indicated that the non-advised investor did not understand the SIPP investment and/or that they were not receiving any advice and yet failed to seek clarification of the investor’s understanding.

• Failing to check that advisers who advised investors had the necessary FCA permissions.

• Did not have the necessary authority from the investor to authorise the underlying investment being made via the SIPP.

The FSCS said it expected to receive more claims during 2018/19, and as a result forecasts that the funding requirement for investment providers will be £34m for that year.

FSCS chief executive Mark Neale said: “FSCS steps in to protect consumers when authorised financial services firms fail. We are satisfied in these cases that certain claims are eligible for compensation and expect to receive more claims of this nature during 2018/19. We have therefore adjusted our forecast funding requirement for investment providers to take account of these failures but will continue to monitor claims volumes and will update our forecast ahead of the final levy announcement in April.”

A summary of the basis of these claims and FSCS’s approach is available on FSCS’s



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