FCA warns on SIPP provider failures after Berkeley Burke decision

Hannah Godfrey reports...

The Financial Conduct Authority (FCA) has written to SIPP providers to remind them of their regulatory commitments following the outcome of the Berkeley Burke case.

A letter from FCA chief executive Andrew Bailey to self-invested personal pension providers (SIPP) seen by RP’s sister title Professional Adviser asked firms to consider the “potential implications” of today’s Berkeley Burke decision.

It was revealed earlier on Tuesday that the High Court has rejected Berkeley Burke’s claim against the Financial Ombudsman Service (FOS) decision from 2014. The FOS decision had ruled Berkeley Burke had to compensate a client after it failed to carry out appropriate due diligence on their investment.

Justice Jacobs backed the ombudsman’s decision in the High Court. He found it followed the guidelines set out by the FCA when making decisions and therefore dismissed the claim by Burkeley Burke.

Bailey’s letter urged providers to notify the FCA immediately if the outcome of the case called into question firms’ ability to meet financial commitments.

He wrote: “If the outcome of any of these cases calls into question your firm’s ability both now and in the future to meet its financial commitments as they fall due, you must notify the FCA immediately. Where relevant, firms should also notify claims to their professional indemnity insurers in accordance with their policies.”

Bailey also reminded firms of their regulatory commitments in the event of failure, noting: “We recognise that if a firm may not be able to meet its financial commitments, it may be in the interests of some of its customers for part or all of its business to be sold to another firm.

“If your firm does so, we remind you that our Principles for Businesses require your firm to pay due regard to its customers’ interests and treat them fairly. In particular, in pursuing any sale, your firm should pay due regard to its implications for customers who may have compensation claims.”

He continued: “We expect all directors, as well as complying with the relevant provisions of the FCA Handbook, to comply with their statutory and non-statutory duties. These include, where a firm is at risk of insolvency, their duties to creditors, such as customers to whom compensation is or may be due.”

Bailey reminded firms they were obliged to communicate in an “open and co-operative” way and disclose to the FCA anything relating to them of which it would expect notice. He said this includes whether a firm is considering selling all or “a significant part” of it to another business.