SIPP providers face an interesting couple of months ahead as the courts will be weighing in regarding SIPPs mis-selling. Carey Pensions face a court case this month in relation to due-diligence possibly not been undertaken on the underlying investment for one of their SIPPs. The FCA will be an interested party in the gallery for this case, possibly also answering questions regarding its governance
This will act as a test case against Carey pensions for the firm involved. This could therefore be a significant development in claims against SIPP providers. The FCA had previously said that providers cannot absolve themselves of all responsibility (in a thematic review in 2009), and it’s possible the courts may consider that SIPP providers are therefore financially responsible for their customers losses, for not undertaking the required due-diligence regarding the investment.
This is not the first time the courts have waded in regarding SIPP providers, with Berkeley Burke being ruled against in regard to a due diligence claim for an investment into Sustainable AgroEnergy by the FOS back in 2014. The provider then requested a judicial review into this verdict, and has ended up in what could be generously described as a total mess, with back and forth from the courts and the ombudsman, with the possibility of judicial review still outstanding.
Now, however, the case soon to come before the courts will hopefully be more conclusive in its verdict. With a number of other claimants waiting in the wings, plus a class action lawsuit reaching the courts later in the year against another provider, Berkeley Burke, this could result in a crucial verdict.
There are many reasons why this verdict could be important. Firstly, SIPP’s have been headline news for several weeks, particularly with regard to the actions of some advisors regarding British Steel workers. The courts don’t want to be clogged up with cases for SIPPs for the next several years (Berkeley Burke could be looking at more than a 1000 claims against them alone, depending on the outcome of the class action lawsuit). Court cases are also potentially massively disadvantageous for claimants. It can take a huge amount of time for a verdict to be reached, and this time could be more than doubled if the case goes to appeal. As the Berkeley Burke case above shows, this could take several years. This is far from ideal for customers who have potentially lost all their pension fund; the time and cost that can be sunk into a court cases can be overwhelming.
Where this may leave SIPP providers is causing a lot of sleepless nights in the industry. Carey pensions have already spilt their SIPPs into good and “distressed” books, officially for administrative reasons. Customers have been informed if their investment is considered “distressed.” If the courts hold providers liable for not undertaking proper due diligence, what does this mean for customers with investments they’ve acknowledged as potentially troubled? Certainly, it won’t just be the FOS watching the current court cases with interest.