The Financial Services Authority has started a series of visits to eight SIPP providers in an effort to tackle the risks posed by smaller firms and the use of Unregulated Collective Investment Schemes (Ucis) in SIPPs.
Ucis are a form of investment, which, as their name suggests, are not regulated by the FSA. They are generally deemed to be higher risk and only suitable for ‘sophisticated investors’, over recent months the products themselves, along with the way they are distributed and bought, have been put under greater scrutiny the media and regulators.
The latest visits by the FSA for part of a wider program of scrutiny of SIPP providers which started with a questionnaire sent to a wide range of SIPP providers earlier this year. On that occasion the FSA wanted to examine the legal structure and capital adequacy requirements of SIPP providers.
Eight SIPP providers visited
The first of the eight providers to be visited by the FSA will be Stadia Trustees who have a significant number of SIPPs invested in Ucis and overseas investments. Their director, Tony Hales, said: “I’m not afraid of what the FSA finds. What I feel confident about is, if they question things, we have a process in place to refer them to.”
Experts believe that the FSA is targeting smaller SIPP providers in this part of their review as these types of firms tend to accept a wider range of investments, including private company or unlisted shares, overseas property and more esoteric investments such as Ucis.
The questions the FSA will be asking is whether exposure to these types of assets increase the risk to the SIPP provider and therefore expose other clients to additional risk.