SIPPs: Ombudsman finds against SIPP provider in landmark ruling

Posted on August 1st, 2014 | Categories - News

Financial Ombudsman ServiceThe Financial Ombudsman Service (FOS) has upheld a complaint made by an investor, in a ruling which could have wide ranging implications for other SIPP providers and investors.

The FOS has ruled against Leicester based SIPP (Self-Invested Personal Pension) provider Berkeley Burke, following a complaint made by an investor into an unregulated biofuel investment scheme, Sustainable AgroEnergy, in 2011.

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The FOS reported the facts of the case:

  • ‘Mr A’ invested £24,000 into the biofuel scheme via a SIPP with Berkeley Burke
  • ‘Mr A’ was introduced to Berkeley Burke by an unregulated adviser who also was also an agent of Sustainable AgroEnergy
  • Despite being given a series of written warnings by the SIPP provider, explaining the high risk nature of the investment, ‘Mr A’ took the decision to proceed
  • Subsequently, Sustainable AgroEnergy went into administration resulting in ‘Mr A’ losing his entire investment

The FOS has now ruled in favour of ‘Mr A’, saying that Berkeley Burke should have been aware that the investment was potentially unsuitable and investigated further.

In response Berkeley Burke argued that it had not advised ‘Mr A’ and as they simply provided the SIPP were in no position to consider the appropriateness of the investment.

However, in his ruling, FOS’s Roy Milne, said: “Mr A’s investment was introduced by an unregulated intermediary. In my view, Sustainable AgroEnergy was an unusual and esoteric investment. This was a relatively small-value SIPP invested in an unusual and new investment. These factors should all have alerted Berkeley Burke to the fact that this investment and the Sipp were potentially unsuitable.”

Milne continued: “Berkeley Burke should have made further enquiries to establish whether the investment was suitable for Mr A.”

Berkeley Burke has been ordered to pay ‘Mr A’ a lump sum equal to his original investment, plus the return of the FTSE WMA index over the same period of time, plus £500 to compensate for the distress and inconvenience caused.

Reaction

It is unclear whether the FOS ruling will set a precedent for other cases as each complaint is treated on its own individual merits.

However, reaction to the ruling has been swift and diverse.

Commenting on the decision, a spokesperson for Regulatory Legal, a form of solicitors who act on behalf of investors, said: “”There are literally hundreds of SIPP cases where this decision would apply. This is a game changer. We have claims relating to Harlequin, GFI, Green Oil to name but a few. All relate to the same point. SIPP providers must feel very nervous today.” (Source: Professional Adviser)

However, Neil MacGillivray, Chairman of the Association of Member Directed Pension Schemes (Amps) took a different view, saying: “Looking from the document released with the decision, it seems very harsh. It seems harsh, particularly since they actually warned the member that it was a high risk investment.”

MacGillivray continued: “If you actually look at that, an individual gets a warning letter telling them it’s a high risk investment, they go ahead and do the investment, and then say: well I shouldn’t have been allowed to have gone into it. I think that is going to change a lot of business’s business models.” (Source: Citywire)

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