The company has been ordered to pay the investor, referred to as Mr A, the total value of his investment and £500 for distress and inconvenience as well as any outstanding fees.
Mr A had invested the money in Sustainable AgroEnergy, an unregulated investment, after being introduced by an “unregulated agent” from whom he believed he was receiving advice, but the firm soon went into administration and he lost his entire fund.
After his initial complaints to Berkeley Burke were refused, Mr A took the case to the FOS, who concluded that his complaint should succeed.
However, the company argued that it did not advise Mr A and made clear to him the level of risk attached to his investment.
But in a decision published earlier this month, ombudsmen Roy Milne upheld the complaint.
He said it was clear that Mr. A was an “unsophisticated investor”, and that Berkeley Burke had not taken “sufficient” steps to adhere to the Financial Conduct Authority's 2009 guidelines, which sought to confirm that intermediaries advising SIPP clients are authorised by the FCA, and identify “anomalous” and “unsuitable” investments into the products.
“I am satisfied that if [Berkeley Burke] had followed the guidance given by the FCA that Mr A would not have started the SIPP,” he wrote.
"Inappropriate"
Tobias Haynes, paralegal at Regulatory Legal, said holding “inappropriate” SIPP providers marked a step forward for the industry.
“The FCA has created a variety of guidelines detailing what they expect of SIPPs, and 2009’s were the first to acknowledge responsibility on the part of the provider,” he said. “This is what has allowed this case to happen.”
He said that, before the guidelines, there was no responsibility on the part of the provider, meaning this case has “distinguished itself” and set a precedent for the future practice.
“People will follow this ruling, and it has been expected for a while,” he said. “I think it is totally right.
“If you have a retail client with no experience who is persuaded by a salesman to invest through a SIPP without an adviser, then there should be questions asked of a provider that stands back and lets clearly inappropriate investments happen.
“An adviser breaks the chain of causation, but if they are absent then it seems right that the blame would pass on to the provider.”
He added that he felt the ruling would encourage good practice in the future, possibly wiping out smaller providers who would struggle to adapt to the new regulatory environment, creating a market consisting of several larger companies operating under “good practice”.
