FCA probes Sipp providers for data in wake of Dear CEO letter

By Michael Klimes

Go to the profile of Money Marketing
Nov 12, 2018
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The FCA has written a letter to Sipp providers asking them to give information about their business activity by Thursday, Money Marketing can reveal.

This data request followed the watchdog’s Dear CEO letter sent to Sipp operators last week to draw attention to High Court claims against Sipp providers Berkeley Burke and Carey Pensions.

This letter outlines its expectations of Sipp providers in relation to their due diligence obligations when accepting investments.

On the same day as this letter was sent the High Court published a landmark ruling where Berkeley Burke lost its case against the Financial Ombudsman Service which it is currently appealing.

The questions

The data request letter obtained by Money Marketing asks Sipp providers to give details about their professional indemnity insurance cover such as who provides the cover.

It also wants details about any excesses, exclusions and limits applicable to the cover and any notifications Sipp providers have made to insurers.

Regarding their financial position the FCA wants to know if firms have sufficient capital to meet regulatory and other financial obligations now, and for the foreseeable future.

Furthermore the FCA asks if firms sought professional advice regarding solvency or viability of the business in the last six months.

The watchdog asks for board minutes relating to any discussion of winding down planning and the solvency of firms.

It also asks providers if they have been in any discussion with other firms regarding a potential sale or acquisition in the last 12 months.

The regulator also wants firms to provide data for the volume of complaints that have been referred to the FOS in the past 12 months that relate to Sipp investments.

FCA visits

Aside from the data request Money Marketing has also learned the watchdog has contacted some firms to arrange visits to them in the near future.

Dentons director of technical services Martin Tilley says: “I can confirm I have heard the rumours the FCA has been approaching firms to visit them after it sent the [Dear CEO] letter.

“To my knowledge we have not been approached yet but it is prudent for Sipp providers to plan for the worst potential outcome of the case involving Berkeley Burke which is the ruling is upheld.

“This ruling has opened up but not answered the question of what an appropriate level of due diligence for Sipp providers is when vetting investments.

“This can only be answered by Sipp providers checking each non-standard investment and due diligence around that investment. This could take hundreds of hours.”

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