The Financial Ombudsman Service (FOS) has upheld a second decision in as many weeks against Guinness Mahon, relating to a high-risk investment made into a SIPP, following unregulated advice.
It centres on how Guinness Mahon opened a self-invested personal pension scheme (SIPP) for the client following advice from unregulated firm, Avacade.
The firm, which the FOS ruled were not authorised to provide pension advice, had allegedly persuaded the client to make a high-risk investment into schemes including Ethical Forestry.
The FOS agreed with APJ that Guinness Mahon should have had considerable doubts about the motivation and competency of Avacade.
The ombudsman stated that due to Avacade’s business model Guinness Mahon should have been aware that opening a SIPP would result in consumer detriment.
The FOS, therefore, ruled it was bad practice, and against its duty to treat customers fairly, for Guinness Mahon to accept business from Avacade.
It ruled Guinness Mahon should pay fair compensation for the client’s losses. As it is currently unable to value the investment, the FOS said it would treat it as though it has lost all value.
Guinness Mahon is now liable to pay the total amount of compensation as a cash sum. The FOS also ruled that they pay the client an additional £500 for the upset caused.
APJ solicitor Glyn Taylor said: “What is most notable here is that the FOS have made the link to Avacade and acknowledged that SIPP providers have a duty to consider whether accepting referrals from unregulated introducers would be detrimental to clients.
“To our knowledge, these cases are the first time the FOS has actively made the link that SIPP providers should be responsible for due diligence when accepting high volumes of referrals on an execution only basis from unregulated introducers.”
In the previous ruling, the FOS ruled on the same grounds, calling on Guinness Mahon to offer fair compensation, as the client had also invested in one of the firm’s SIPPs on the advice of Avacade.
Taylor added: “We welcome these decisions by the FOS and believe this sets a precedent for other clients who were encouraged by unregulated introducers to invest in SIPPs with Guinness Mahon, as well as other providers such as Liberty SIPP.”
APJ has so far issued five legal cases against Guinness Mahon and is preparing to issue around twenty more. It has also issued more than 30 claims against Liberty SIPP relating to underlying unregulated investments.