This morning I had the chance to praise Hargreaves Lansdown for innovative work helping self-invested pension policyholders understand the risk they take in their portfolios. SIPPs can  and do offer those who want to self-invest , the opportunity to pit their wits against the market. That choice is important. My article points out the important function of a SIPP platform, in preventing self- harm. In the right hands, we can trust SIPPs.

Looking back in anger

When I was talking with steelworkers in 2017, I came across SIPPs that were not protecting policyholders from self harm. I wrote about one example at the time and have had cause this week to return to that blog and update it

I’ve noticed the fund sold by Darren Reynolds which heralded the start of the BSPS scandal has folded. Investors should have been redeemed 90% of their money immediately, which, given its parlous state, still represents a huge loss.@JosephineCumbo @DavidPenneyPRW @PhilippaHann pic.twitter.com/a7zW6DCHvE

— Rush (@exRAF_Al) December 30, 2021

Looking again at the complex connections between the various parties who profited from the Newscape Global-Asset Conservative Fund it is still hard to think of a more complete failure to treat the customer failure which stayed within the UK regulatory perimeter.

The fund was run from London but registered in Ireland by Newscape, a fund manager still operating and advertising for new funds

The  fund invested in other funds managed by managers who took their fees as laid out in the Key Investment Information document and the fund prospectus, both of which are properly linked to the Newscape website

The various parties operating the fund including a company called Vega Algorithms remain as at 2017. Gallium Ltd continues to provide services (including those of Vega Algorithms, which it owns,  to Newscape).  Gallium is an Authorized Corporate Director and though the link to its FCA permissions from its website may still not be working, you can see the range of responsibilities it has from this link.

Gallium owns Vega Algorithms , a company that was employed by the Newscape funds to manage risk using digital trading. Vega was how Gallium were able to have a stake, not just in the governance of the Newscape Funds, but in the management fees charged to steelworkers.

Gallium has had a troubled few years as you can read from this article in the London Standard. Tony Norris, its principal Director, who paid me a personal visit to suppress my blogging, resigned earlier this year as did his wife. Al Rush was also threatened.

In 2017,  Gallium was reported to have paid the Norris’ £1.6m and on top of this , paid £68,000 to their children who were at university

According to the same Tony Norris ” the matter (BSPS transfers) has been investigated and Gallium found to have done nothing wrong“.

I am sure that Gallium will remain blameless, though the list of scandals linked to them continues to grow.

It was also involved with Audax and associated master trusts closed down by the Pensions Regulator. 

And it was involved in collapsed DFM Strand Capital (see below)

West Ham fans will be familiar with Basset & Gold , as will the many who lost money through this mini-bond. Basset & Gold was an authorised representative of Gallium.

So what of the supporting infrastructure  that enabled steelworkers to invest in the Newscape Fund?

Momentum SIPP has rebranded to become ipension SIPP. It has new management. Momentum Pensions will remain the brand for its qualifying recognised overseas pension schemes (Qrops) business which will accept DB transfers with a minimum CETV of £40,000.

Intelligent Money is still trading as a SIPP (and is now sponsoring  motor racing.) It is also offering offshore SIPPs. Julian Penniston Hill continues as CEO.

The architects of the Vega Algorithm appear to have moved on (including Steffen Hoyemsvolle  whose Linked In CV makes no mention of his association with Vega or Strand. Steffen held the CF30 customer function at Strand from 10 March 2015 until the 7 April 2017.

Strand Capital has been in special administration since April 2017 and FSCS has been paying claims since 2019.

He worked at Strand alongside Strand’s Director Hamilton Keats and both were involved in failed auto-enrolment venture “My Workplace  Pension” for which Strand was supposed to be the default fund. Keats was also CF1 for Strand. If you want to follow me down the rabbit hole of conncections between Strand and Clive Howells of Celtic Wealth Management, you might want to read my blog on the happy demise of “MWP”.

You may  not be surprised to know that Clive Howells was behind the sausage dinners that were set up to introduce steelworkers to Darren Reynolds and Active Wealth Management (small world).

Hoyemsvolle and Hamilton Keats  went on to co-found   Platform One , a wealth management funds platform preciously known as Kodin. Dave Casseteri , who is listed on companies house as sole Director of the Vega Algorithms is CTO of Platform One.

In short, the entire superstructure that supported the investment of Active Wealth Management’s clients (transferring out of DB schemes) is intact.

The Teflon coated funds industry

“Non-stick” is a phrase that applies to the entire chain, whether as SIPP managers , investment managers ,  fund managers or the lawyers and compliance teams who ensure that everything is done without fear of liability.

I clipped this from an article from New Model Adviser, which was published when it became clear that anyone investing in Newscape funds (then called 5alpha) , weren’t getting out of them without some severe penalties.

A spokesperson from Vega Algorithms, which provides Gallium with platform technology and services, said: ‘the model portfolios available for advisers to select on the platform are invested into fully authorised and regulated, HMRC recognised UCITS, the gold standard for retail investment owing to their transparency, liquidity and regulatory oversight. All charges are disclosed to advisers beforehand.

I particularly enjoyed Julian Penniston-Hill sounding bamboozled.

Having always prohibited non-standard assets, given they were the type which enabled introducer payments, we were shocked to discover that a regulated standard asset [the Newscape funds] held within these DFM portfolios are also able to pay a 5% introducer fee.

Julian should have read  the second half of my blog to understand just what he had admitted onto the Intelligent Money platform.

He would do well to read Pension Life to catch up on the world of offshore pension scams,

Only the clients suffer

It is a sad truth, that the only casualties in the sorry business of factory gating were the clients. Active Wealth Management and its unauthorized introducer Celtic Wealth simply folded and while we are unlikely to ever see Darren Reynolds and co advising again in the UK, they are free to ply their trade outside the FCA’s regulatory perimeter.

Active Wealth clients have so far claimed over £10 million in compensation from the FSCS in relation to the advice that they had received. Individual claims were capped at £50,000, however, so the true amount lost by Active Wealth clients actually equates to more than £24 million.

And let it be said, before I get another round of telephone calls, personal visits to my flat and legal letters,  I am not accusing any of the firms or individuals mentioned of doing anything illegal. None of these losses are from criminal activities.

So what of the Regulator?

The losses are no less real, for not being the results of criminal activity

Almost all of those mentioned  above are regulated by the FCA. The FCA enforces a duty of care towards customers of firms it regulates. It has been looking to strengthen  its duty of care regulations with a new Consumer Duty on the firms it authorises. The most recent consultation on this was last month.

The problem with any fiduciary duty is that if you are expert enough, you can find a way to circumnavigate it. Which is what has happened here.

The remaining customers of Active Wealth Management and the small number of customers coming through other distribution lines will receive back from their investment in Newscape funds a fraction of what they would have got, if they had simply invested in market trackers as workplace pensions have done over the past five years.

Redress.

But these losses , which arise from advice given by people promoted on the Government’s own adviser directory, are not the worry of the above mentioned firms.

Instead they are the matter of claims against advisers who no longer trade and therefore against the levy which we all pay when we buy financial products.

I hope that when the National Audit Office conduct their review of the FCA’s conduct over the BSPS transfers, they will look both at the regulation of the advice given to transfer and at the investment solutions offered to the steelworkers.

If it can be proved that these firms have failed in their duty of care to those who used these investment solutions, I suggest that they be made a part of the solution – rather than just being a big part of the problem.