Three financial advisory firms – CIB Life & Pensions, Regency Financial Resources, and Kingswood Financial Advisors – have been ordered by the FOS to compensate customers after they were advised to move money from their personal pensions into the unregulated scheme.
Harlequin invested in hotels and resorts being built in the Caribbean, but only 300 properties were built out of a planned 6,000. Investors had to transfer their pensions into a self-invested personal pension (SIPP) in order to facilitate the investment into the scheme.
“Scapegoats”
In 2009, a client had been advised by Regency to transfer his three pension policies – which had a combined value of nearly £57,000 – into the SIPP. The Ombudsman said the firm had not considered the risks of the underlying investment, and said the SIPP charges were higher than the scheme and therefore “likely to leave Mr A worse off in retirement”.
However, Regency did not agree with the findings and said IFAs were being used as scapegoats.
“Harlequin have been brought to their knees, by fraud, malicious actions by third parties, leaked ‘mis-information’ and a campaign of terror by a firm of solicitors,” it said.
“Insufficient information”
In the CIB case, the FOS said the firm had failed to present Harlequin Property “in an impartial manner but rather an attractive investment, thereby potentially misleading Ms E”. It also said “Ms E” had been given insufficient information about the potential risks of the transaction, which meant she was unable to make an informed decision.
CIB disagreed and said it was not responsible for its client’s investment choice and said she was “correctly documented, assessed and – due to her membership at an investment club – was treated as a professional”. The FOS disputed this, saying Ms E should have been categorised as a retail client which meant she warranted more protection.
“Difficult to understand”
The FOS ruled that Kingswood had also failed to consider whether the proposed investment was suitable for two of its clients, who then went on to lose their entire pension pot through the scheme.
“It is difficult to understand how investing all of Mr W’s and Ms G’s pension funds in one unregulated overseas property development could be suitable for either of them,” said the Ombudsman.
These four decisions are the latest to be made on a string of cases involving Harlequin.
Clients were awarded between £300 and £500 in compensation for the distress caused through the loss of their pension funds; this is on top of their overall compensation, which is calculated individually based on the value of their investment.
The Financial Services Compensation Scheme (FSCS) announced in February that clients who were advised to move pension funds into SIPPs can now claim compensation for the total amount of their investment.
