FCA again reminds SIPP providers of regulatory obligations

Hannah Godfrey

The Financial Conduct Authority (FCA) has again reminded SIPP providers of their regulatory and financial commitments following the news that Berkeley Burke SIPP Administration’s court appeal will not go ahead.

Nearly a year ago, FCA chief executive Andrew Bailey (pictured) wrote to CEOs of self-invested personal pension (SIPP) firms to remind them of their regulatory commitments following the outcome of the Berkeley Burke case, which it lost in October 2018.

Following Friday’s (4 October) news that Berkeley Burke SIPP Administration’s administrators had blocked the firm’s upcoming Court of Appeal hearing, the FCA restated its position.

An update on the regulator’s website said: “We reiterate that if the outcome of this case calls into question a SIPP operator’s ability to meet financial commitments as they fall due, they should contact the FCA immediately. We also remind firms of their obligations to treat complainants fairly and handle complaints according to the rules set out in the Dispute Resolution Handbook.

“If a firm pursues a sale of part or all of its business or assets, it should pay due regard to its implications for customers who may have compensation claims. 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.”

The FCA said in the event of any future regulatory applications from connected parties, it would take into account how those individuals acted in the context of the considerations outlined in its letter.

Appeal blocked

On Friday (4 October), Berkeley Burke SIPP Administration’s administrators RSM Restructuring Advisory blocked the firm’s Court of Appeal hearing, which was set to take place in two weeks.

In February 2019, the firm was granted permission to appeal the judgment delivered against it the previous October,which rejected Berkeley Burke’s claim against a Financial Ombudsman Service (FOS) decision.

In the original decision, the ombudsman ruled the SIPP administrator had to compensate a client after it failed to carry out appropriate due diligence on their investment.

In court, Berkeley Burke, which facilitated the investment, argued it carried out the due diligence expected of it at the time, according to Conduct of Business Sourcebook (COBS) rules, and that the FOS subsequently placed undue responsibility by applying FCA Principles 2 and 6 in a way that created a new and unexpected duty of care on the part of SIPP operators.

When it decided not to go ahead with the appeal, RSM argued its wider responsibility was towards Berkeley Burke’s creditors and the safeguarding of funds from the estate for the benefit of the creditors. As a result, it decided not to continue with the appeal.

The administrators said: “Having considered the position in detail with their professional advisers, the joint administrators have resolved not to continue with the appeal of the judicial review.”

Berkeley Burke Group, meanwhile – which now has no financial interest or ownership of Berkeley Burke SIPP Administration – felt there was a strong case for appeal to mitigate the costs on the Financial Services Compensation Scheme (FSCS).

It said: “It is thought that a successful appeal at the Court of Appeal may have mitigated the need for the FSCS to make pay-outs in relation to the company in administration.

“There were therefore compelling and legitimate grounds for creditors and potential creditors to want to see the preservation of separately held cash reserves while independent third parties spent their own cash to preserve a legal appeal that could only serve to protect and enhance the interests of all creditors and stakeholders.”