Ombudsman rejects complaint against SIPP operator's refusal to accept unlisted shares

The Financial Ombudsman Service has rejected a complaint against a SIPP operator which refused to exercise a right to claim shares on the grounds that the shares were unlisted and the terms of the SIPP did not permit the holding of unlisted shares (Mr S Ref: DRN2165111).  The right to claim the shares arose by virtue an existing shareholding by the SIPP.  The Ombudsman concluded that the operator had acted within the T&Cs of the SIPP which did not allow the holding of unlisted shares, and that this feature was clearly detailed in the Key Features of the SIPP. 

Member complaint rejected where four years' fees deducted in one go

The Financial Ombudsman Service has rejected a complaint by a member where the scheme administrator failed to deduct annual drawdown administration charges from the member's SIPP for four years, but then deducted four years' worth of fees at once (Ref: DRN5215271).

In 2014, the member went into drawdown from his SIPP.  At that point he was informed that there would be an annual drawdown administration charge of £100 plus VAT due annually in advance.  The scheme administrator debited the member's SIPP account with the fee in 2014, but then omitted to collect any further drawdown fees until 2018 when it took four years' worth of fees.  The member complained, saying that if the administrator had charged him correctly he would have been alerted to the administrator's high costs and moved his pension several years earlier.

The Ombudsman did not uphold the complaint.  He said it was clear that the administrator had made an error in not collecting the funds annually in advance as agreed, and that it would have been better if the administrator had written to the member in 2018 to explain what had happened and that it was planning to collect the outstanding sums.  However, the Ombudsman did not think that the delay in levying the charges was a reason why the scheme administrator should forego them.  He noted that the member had been informed of the annual charges at the outset and that the first such charge had been deducted, so it was reasonable to assume that the member was aware the charges were payable.  The Ombudsman also said there was some onus on the member to manage his pension and to have not been solely reliant on the charges being made on time.

SIPP operator compensates member for unsuitable investment where firm giving instructions did not have correct regulatory permissions

A SIPP operator has paid compensation to a member following a complaint to the Financial Ombudsman Service (FOS) where the member invested her fund in two unregulated collective investment schemes (UCIS) which failed leaving the member's investment worthless (Ref: DRN4516841).  

The member had apparently received advice in relation to the investment from a firm of financial advisers which had given instructions to invest in the UCIS.  The financial advice firm was based in Ireland, but the specific adviser with whom the member had deal operated from an office in the UK.  The adviser had confirmed in writing to the SIPP operator that he had advised the member of the risks associated with the investment.  The letter included the confirmation, " …I confirm that I am aware of the FSA rules and principal relating to the promoting of, and providing investment advice on, unregulated collective investment schemes and can confirm that my client is categorised as <a certified sophisticated investor and/or a certified high net worth individual> as described in the Financial Services and Markets Act 2000…”

The member brought a complaint against the financial advice firm. She also brought a complaint against the SIPP operator, claiming that it should not have accepted the investment instructions as the financial advice firm did not have the correct regulatory permissions to give such instructions.  The FOS investigator concluded that it would be fair to say that either the financial advice firm or the SIPP operator was responsible for the member's loss, as the advice firm should not have given the investment instructions and the SIPP operator should not have accepted them.  As he was looking at both complaints he concluded that it would be fair to ask each to compensate half of the member's loss.

Following the investigation, the SIPP operator compensated the member for half her loss.  The financial advice firm did not accept the findings, but the Ombudsman upheld the complaint against it and ordered it to compensate the member for the remainder of the loss, having found that the member did not appear to meet the criteria for a sophisticated or high net worth investor, had not understood the risks involved with the investments and would probably not have made them if she had.

Our thoughts

In this case it appears that the financial advice firm was based in Ireland, but also operated out of an office in the UK, which was where the adviser seen by the member was based.  This case illustrates that a SIPP operator may be at risk of being found liable for an unsuitable high risk investment made by a member if it accepts investment instructions from a firm that does not have the regulatory permissions to give such instructions.  Because the SIPP operator agreed to compensate the member following the initial FOS investigation, there is no ruling from the Ombudsman regarding what permissions the financial advice firm actually had and/or needed, but the fact that the SIPP operator agreed to pay compensation indicates that it anticipated that the Ombudsman would have ruled against it.