British firm, Regulatory Legal Solicitors, has written to Martin Wheatley on behalf of a large number of self-invested personal pension (SIPP) investors.
According to the specialist law firm, many SIPP providers failed to protect inexperienced investors – who had either no advice or were advised by unregulated ‘introducers’ – from investing in unregulated products, with some providers even actively promoting and facilitating the transfer.
The letter, seen by International Adviser, said a recent verdict from the Pensions Ombudsman Service (POS) on a case where a client had been encouraged to invest in troubled overseas property development, Harlequin Property, would have “wide ramifications” on the SIPP industry.
In the case, the POS decided not to uphold a complaint from a client who claimed the SIPP provider had failed to carry out sufficient due diligence and had not offered suitable SIPP investments.
“Our clients are vulnerable people who have no or very little knowledge of financial services. Bluntly, they have been exploited"
Regulatory Legal said the POS’ decision is in “direct conflict” with FCA guidance. “We are extremely concerned of the implications that this case will have on this sector,” the letter reads, before suggesting the SIPP industry is already “in a state of chaos”.
The firm said the complaint should only have been upheld when there is evidence that the investor is experienced enough and fully understands the implications and risks.
Clueless
“Providers that close their eyes and ears to a clueless and vulnerable investor investing on representation of an unregulated introducer is to be condemned just as much as the introducer who promoted the investment,” it said.
“Our clients are vulnerable people who have no or very little knowledge of financial services. Bluntly, they have been exploited.
“A SIPP provider is a professional and regulated body which will be aware of the risks of unregulated products, and it should be apparent to them which investors are being taken advantage of by cowboy introducers.”
Responding to Regulatory Legal’s letter, the head of savings, investment and distribution policy for the FCA said the body would “carefully consider” the company’s concerns.
“I share your concerns that a lack of clarity in this market can lead to an enhanced risk of fraud and exploitation of investors. I seek to reassure you that we will put measures in place where we feel necessary to prevent this.”
