John Moret: The SIPP fallout as another one bites the dust.

This article first appeared in Financial Planner Magazine – you can read the original here,

John Moret

John Moret

The news of Hartley Pensions appointment of administrators may not have come as a huge surprise given the recent restrictions imposed on them by the FCA but I believe it is of great significance for the world of SIPPs.

It also once again brings into question the effectiveness of regulatory control of the SIPP market.

I have no specific knowledge of Hartley Pensions nor the reasons for them entering administration. What I find surprising is that Hartley Pensions, since being set up in 2016, has been an active purchaser of the books of failed SIPP providers such as Berkeley Burke, Lifetime SIPP, GPC, Guinness Mahon and Greyfriars Asset Management.

I don’t have precise figures but I would estimate that there may be as many as 10,000 SIPP investors whose customer journey has been little short of a disaster – all under the FCA’s watch.

The recent Public Accounts committee investigation report into the British Steel transfer scandal was scathing in its criticism of the FCA with comments such as:

  • The FCA has consistently been behind the curve;
  • The FCA has not been sufficiently proactive or timely in using its enforcement powers;
  • Other issues have been the FCA’s authorisation and oversight of small firms and its access to data and intelligence to identify problems.

This report comes just 9 months after the damning Gloster report into the regulation of London Capital & Finance which included criticisms such as:

  • The failure of the FCA senior management to implement and embed operational change at the lower levels of the organisation and
  • The FCA’s failure to respond appropriately to information provided by third parties;

The report also highlighted the consequences of the “lacuna” (or gap) in the regulation of ISAs because of the split in responsibilities between the FCA and HMRC.

I believe all of these comments and criticisms apply equally to the SIPP market – the only difference being that it is 15 years since the regulation of the operation of SIPPs was introduced.

Much attention quite rightly has been focused on British Steel but I have previously drawn attention to another scandal – that involving a small advisory firm based in Haverfordwest called 1 Stop Financial.

Between October 2010 and November 2012 that firm established almost 2,000 SIPPs with assets of £112m of which almost half was invested in Harlequin Properties. Prior to 2010 the majority of the firm’s business was mortgage related. All the SIPP customers were introduced to 1 Stop by unregulated introducers. How did that fail to register on the FSA’s radar until it was far too late? Even some elementary data analysis should have raised questions.

Mention of Harlequin is timely as just this week the chairman of Harlequin, David Ames, was found guilty of two counts of fraud and awaits sentencing in September. The Harlequin scandal which started some 15 years ago involved around the same number of investors as British Steel – mainly via SIPPs – and total assets were around £1.4billion.

In 2012 I was interviewed by the BBC for a Panorama investigation into the scandal but the programme was mysteriously “pulled” from the schedules at the last minute. Again why did it take so long for any action to be taken by the FCA?

It is convenient for the FCA that both 1 Stop and Harlequin originated under their predecessor’s watch but that does not excuse the FCA’s lack of proactivity and industry engagement  on these and other issues in the period since 2013 when it became responsible for the operation of the SIPP market.

It has been content to wait for provider failures by hiding behind some highly contentious FOS determinations largely based on a single court case involving a scam. Unregulated introducers continue to operate in this market and with “caveat emptor” apparently no longer applicable to this market it’s been left to SIPP providers to pay the price.

I recall a conversation with a senior FSA official back in 2009 when he admitted that the FSA (the FCA’s predecessor) was struggling to understand this market and the activities of smaller SIPP providers and that it would be much easier if they only had to deal with a smaller number of larger providers. Well it has taken a long time but it appears his wish has largely been granted.

Today’s SIPP market is far removed from the SIPP market when regulation was first introduced. It now more closely resembles the personal pension market, the deficiencies of which were the main reason for SIPPs being introduced. Risks remain particularly for the smaller SIPP providers with FOS determinations lying behind most of the recent failures.

As I mentioned in my last article for Financial Planning Today in April I believe there is an urgent need for the “regulatory fog” around SIPP regulation to be cleared. It is nearly four years since, with the support of several larger SIPP providers, I circulated a policy paper to the FCA, FOS, FSCS, HMRC and others with proposals to clarify the role and responsibilities of a SIPP provider. The three key recommendations were:

  1. Defining what is an “acceptable” or appropriate investment;
  2. Clarifying precisely what is required of a SIPP operator with regard to due diligence of investments and introducers;
  3. Confirming the extent to which the requirements in 2. apply where the SIPP was accepted on an “execution-only” basis and also what other requirements, if any apply in these circumstances.

Unsurprisingly there was little interest shown from the FCA or the another parties mentioned.

Perhaps the introduction of the new Consumer Duty requirements will encourage a new level of engagement. The uncertainties around due diligence requirements, particularly on “execution-only” business, may well become more significant as the investigations into the Woodford affair progress.

In the meantime I fear that SIPP providers facing FOS decisions and determinations on SIPP-related issues should fear the worst.

John Moret is principal of MoretoSIPPs consultancy and one of the UK’s most experienced SIPPs experts, commentators and speakers. He has worked for Suffolk Life and several other SIPPs providers. He is chair of advisory business Intelligent Pensions and CX insight business Investor in Customers. 



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to John Moret: The SIPP fallout as another one bites the dust.

  1. Pingback: The SIPPs that opened pensions to today’s scammers | AgeWage: Making your money work as hard as you do

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