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FSA investigates IFAs over Ucis Sipp advice
by Michelle Abrego on Jan 21, 2013 at 08:04
The Financial Services Authority (FSA) has said it is investigating advisers over unsuitable advice to clients to transfer assets into unregulated collective investment schemes (Ucis) held in a Sipp.
In a warning email sent to advisers, it said it was concerned that some advisers were advising on pension transfers and switches without assessing the investments.
The regulator said the cases it had seen operated under a similar advice model, where an introducer markets an Ucis before the potential investor is then introduced to an adviser. The adviser claims they are not giving advice on the investment, but on the Sipp that will hold it, and in some cases helps the client access their other investments to fund the Ucis purchase, the FSA said.
‘The FSA is investigating a number of firms and has secured a variation of their Part IV permission so that they are unable to continue operating in this way,’ the regulator said in the email. ‘The FSA is also considering taking enforcement action against these firms.’
‘Financial advisers using this advice model are under the mistaken impression that this process means they do not have to consider the unregulated investment as part of their advice to invest in the Sipp and that they only need to consider the suitability of the Sipp in the abstract. This is incorrect,’ it added.
It said that advisers dealing with such cases needed to consider the suitability of both the investment and the wrapper, and the investments the client is looking to transfer from. ‘This is because if you give regulated advice and the recommendation will enable investment in unregulated items you cannot separate out the unregulated elements from the regulated elements.
It also urged advisers and Sipp operators to whistleblow on those breaching FSA requirements over Ucis investments in Sipps.
In a separate email, the regulator warned advisers over their responsibilities when investing in Harlequin Property, a UK based overseas property sales agent that is not regulated by the FSA.
‘The FSA expects advisers to have undertaken thorough due diligence on the various developments being sold through Harlequin Property to fully satisfy themselves that it is a suitable investment taking into account all relevant factors,’ it said.
It said advisers should consider how building work was progressing, how client funds would be used during the construction phase, and assess all publicly available information on the overseas properties and all the parties involved in the investments. Harlequin said it endorsed the guidance.
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