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FSA investigates IFAs over Ucis Sipp advice

by Michelle Abrego on Jan 21, 2013 at 08:04

FSA investigates IFAs over Ucis Sipp advice

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.

32 comments so far. Why not have your say?

George Kendall

Jan 21, 2013 at 08:42

Maybe they just got their acronyms wrong and thought they were UCITS?

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Arthur Schopenhauer

Jan 21, 2013 at 08:55

However if the IFA takes a position so that they can see what is happened like a co investor or a non exec directorship this is criticised as being conflicted please joined up thinking IN ADVANCE please not dammed if you do and dammed if you dont

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Jan 21, 2013 at 09:13

The FSA is quite correct in investigating this abuse. The process is something like:

1 Attract clients to a website saying they will get a free report on client's pensions. However, as the report generating firm is unregulated, there is no charge to client.

2 Report comes back saying their pensions are not doing well, however if they considered investing in .............. insert UCIS here. They would be far better off than existing pensions. However remember we are unregulated and cannot give advice. If you want to invest in said UCIS, we can introduce you to an IFA who can advise you how to invest into this UCIS

3 IFA (not much more than a crook) introduced to client who is asked 'do you want to invest into said UCIS?' Client says yes. IFA then states 'OK then, that is your decision, I will find a suitable wrapper for you. Then 'this SIPP is suitable, here is my suitability report regarding my research into SIPP providers that will accept this UCIS' Sign Here.

4 Original report writer gets their 10% cut, IFA takes a cut, UCIS promoter takes most of the rest.

5 When investment fails IFA states 'execution only' on investment advice. Report writing firm is unregulated, criminal law only, whats the chance of being prosecuted? What's the sanction?

FSA, show your mettle, man up and get all these crooks behind bars. It is yet another scam that needs to be shut down ASAP.

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Bridge North

Jan 21, 2013 at 09:23

Hicky - spot on.

was offerred many opportunities to follow this model but refused as per the FSA comments re advice consideration. was told by a promoter that the other IFA firms did not consider the investment issues just the wrapper. we can alll make mistakes but ................................

St Lucian fractional ownership being just one alongside Cape Verde holiday lets.

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Bob Donaldson

Jan 21, 2013 at 09:28

The firms in question have no principles and no moral compass!

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Jan 21, 2013 at 10:59

Perhaps with hindsight, (the most accurate form of vision), landbanking schemes in Chad & Mali were perhaps not the best investments to put into your SIPP etc

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Cheesed off

Jan 21, 2013 at 11:19

An emerging scandal.

1. Have you got a small pension pot?

2. Are you disappointed with the returns?

3. Would you like a place in the sun?

4. Meet my IFA friend who can turn 1 into 3.

5. Don't worry about advice on the investment - it's a lovely runner guv I'll stake my life on it!

Repeat many thousands of times.

IFAs advising on the SIPP transfers will go bust. FSCS will pick up the liability, the rest of us will pay for this.

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Chris F

Jan 21, 2013 at 11:25

I was so pleased to see this at last. I reported this scam about 18 months ago to the FSA, detailing the companies involved, how they were doing it and offering names and contact details of people that had been offered this "service" (with their permission).

How many people have been ripped off in the meantime?

Still, it is good to see something being done.

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Jan 21, 2013 at 11:51

Chris F is right, although l tipped them off about 2 years ago.

An MP known to me put a file together for presentation to Mark Hoban who was at that time in overall charge, but l understand he binned it on the grounds there was nothing to worry about

The MP then went to his LibDem equivalent in the Lords (Lord Oakshott) and got a much more favourable hearing. But he was up against "Hoban's cabal"

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Jan 21, 2013 at 12:10

@ Hickky

How naive of you.

The FSA doesn't recognise foresight with product recommendations. They want you to invest in areas that have done well and you can thus produce graphs and reams of paper (with the "although past performance is no guarantee to the future" caveat etc), but if you try and recommend a fund well ahead of the herd, without the charts to back you you are on a hiding to nothing. That's exactly the problem. The FSA never look to anything except their next lunch. They seem to prefer investors to buy at the top of the market than have an IFA use some nouse

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Jan 21, 2013 at 12:36

@ Anitaki

You cynic you.

You are repeating the ill informed views of a compliance officer who thinks by adopting this approach he can defend the company from complaints. This approach does not work as any counter argument can be made for poor advice following a capital loss.

there is nothing wrong in recommending a fund well ahead of the herd as long as your client is prepared to take the risk, and it forms part of a balanced portfolio.

I find complaints arise when you ignore a client when performance is not as good as you had hoped. Then the FSA will not be involved as long as you demonstrate in your recommendations how you feel this investment will benefit your client.

There is no future in recommending individual property investment abroad, green oil or gold coin investment as the risk cannot be judged. It is not looking at a new asset class before the heard.

If you think it is part of our remit to find highly speculative investments for our clients, you are mistaken. If a client came to you and said 'I want an investment thet will double my money in 5 years' and took his money then it is you that little morals.

Nothing personal, I did not accuse you of anything!

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Jan 21, 2013 at 12:55

Hickky, l am not being cynical, but l am speaking from experience

The Ombudsman (who spoke English as a second or third language and did not understand the concept of £Pound cost averaging with a large portfolio) overturned a FSA judgement in my favour and it cost me dear.

PS > The (ex-) client had also enrolled the services of an ambulance chasing firm who were able to "re-invest for" her

Never again

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Jan 21, 2013 at 13:13

IFA CROOK... I Have yet to met one that isnt... Sat on their high horses and clients on something much higher... Trusting these dogs in mangers... I F A does afterall mean ... If everyone cant help you... I will Find Away.. Kerr hing... Get a life guys when you point a finger the remaining 4 point back at you..

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Chris F

Jan 21, 2013 at 13:44

to: IFA Calling the Pot black.

Heh. Not a bad trolling attempt:


1 2 3 4 5 6 7 8 9 10



3 out of 10 my friend

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Jan 21, 2013 at 13:49

To to: IFA Calling the Pot black.

If you haven't yet met an honest one, you definitely need to get out more.

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Jan 21, 2013 at 13:59

@ IFA Calling...

What a beautifully written piece of prose you just submitted. Succinct, pithy and straight to the point.

Pointing fingers is the very point of blogs and indeed journalism needs to do a lot of pointing in order to investigate corruption.

It is a crying shame that Mr IFA CALLING has not yet met an IFA who isn't a crook. Perhaps a brief lesson in critical assessment would help. !

@ Anitaki

I am so sorry you have had such a poor time with the Ambulance Chasers. At least Mr IFA CALLING cannot possably be part of that fraudulent occupation as he would never trust anyone to re-invest for her.

In our office we have had compensation cowboys attempt to make a claim, but they have failed to get past the first stage. Often they try it on without any reason, let alone loss, but just see it as potential extra revenue following a successful PPI claim.

But don't let your past poor experience stop you from recommending what you feel is the right bespoke recommendation for your client. Most cautious funds are nothing of the sort, and will provide dreadful returns over the longer term. If your clients are not prepared to take a modicum of risk, should they invest at all, or should you allow them to be prey to the high promises, little reality brigade? You know what is right, and if you are a part of a network that does not allow you to recommend what you feel is right for your client, change jobs.

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Bridge North

Jan 21, 2013 at 14:24

the moral high ground must be the warmest place just right now - think I shoud go there myself.

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J Stevenson via mobile

Jan 21, 2013 at 14:34

@Ifa calling pot black... At last someone with the guts to stand up and say what majority think of the entire industry.. Take a bow.. Sounds like most of the crooks are on the posts as it is clear from the unmeasured and scathing tone if their replys they have a few skeletons buried... What ever happened to free speech or does that just apply to UN members...

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Chris F

Jan 21, 2013 at 14:42

@J Stevenson:

My cat's breath smells of cat food.

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Jan 21, 2013 at 14:47

Ahh, the upper moral high ground has been reached by J Stevenson. By endorsing comments such as those made by IFA CALLING he then states that the advisory industry are all crooks and must have skeketons buried. However he also feels a majority of the population think the advisory industry agrees with him.

To start with, if the majority of the population thinks anything of the industry, positive or negative I would be gobsmaked! Most of the population don't care one way or another.

Mind you the majority of the compensation cowboys feel this way. What part of the industry do you work in J Stevenson?

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Man in Black

Jan 21, 2013 at 16:04

We seem to have drifted off the original thread, which is a shame as the original comments by Hikky & Prof. Schopenhauer were well made.

@Arthur S.

Yep. Quite right. The FSA basically have two templates for bashing advisers who have had the temerity to try and include investments that don't drop like a stone when a fat continental banker sneezes...these are (1) you're wrong because of insufficient due diligence; or (2) you're wrong because of a conflict of interest.

These can both get funny if you try and argue e.g. about the standard required of you and what you've then actually done. They like to just blank you and say "Well, lets ask that 'Skilled Person' over there". They then insist that you pay a firm of their choice - they knock out anyone whose work they "don't like" - to agree with them, thus creating a degree of objectivisation of a subjective opinion...


Now, am I the only one to notice this?

Not all of these investments are collectives. [Some people would say that makes them even more niche...].

It appears to me that the FSA has decided to announce a unilateral extension of the Regulated Activities Order... By definition, it is not within the gift of the FSA to announce that an IFA is obliged to consider the suitability of some investment the SIPP might make if that investment is not a 'specified investment' for the purpose of the Act....

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Arthur Schopenhauer

Jan 21, 2013 at 16:29

I think i will become an estate agent and make a desk available to a well qualified IFA to sit in my office and really help clients with their finances.. Which country should I choose, answers on a postcard please to the usual address

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Jan 21, 2013 at 16:45

Ones with no extradition treaty

1) Turkish Cyprus

2) Cuba

3) somalia

4) North Korea (not recommended)

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Jan 21, 2013 at 16:46

And of course, l forgot


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Balanced View via mobile

Jan 21, 2013 at 17:47

The is one almighty point made here by FSA. Advisors are liable for the unregulated investments clients end up with if they recomend the SIPP whatever their reports state. This is welcome clarity.

However. They name a particular investment provider but do not specifically state that there is anything unlawful about it, specifically identify why it might not be appropriate for a pension investment, explain what due diligence should be undertaken for such an investment or specifically state it is not acceptable. It they have evidence of wrongdoing, they should raise with the relevant authorities. If there is sonething specifically in the structure they deem unsuitable, they should explain what it is. Their role should be to protect clients by helping advisors understand what to look for. Not penalise advisors after the event.

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Richard Hardy

Jan 22, 2013 at 08:39

More and more SIPP providers are steering away from 'off-piste' investments. This should allow the FSA to concentrate on those providers offering access to UCIS and 'Brazilian rain forest funds'.

The simplest way to deal with this is to allow only regulated investments within a SIPP. As usual however the FSA refrains from providing black and white guidance.

It's a good job the FSA aren't involved in regulating the aircraft industry. Imagine how many aircraft would crash before they made a decision to stop planes from flying.

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Cheesed off

Jan 22, 2013 at 09:19

@ Balanced view

The FSA say to look at publicly available information. If you check the last accounts for Harlequin you will see that they are qualified by the accountants. Also there are questions about the ownership of the underlying properties.

The accounts can be obtained for £1 from Companies House online. Not much effort for someone considering putting thousands into this to make.

Agree about penalising advisors after the event - but what diligence have they shown? If none then they are at risk.

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David Curley Dip extrodinaire

Jan 22, 2013 at 12:51

The issue with Harlequin was that many people were being shown how to liquidate their diverse investment funds and invest in offshore properties which by their nature was investing their money into 1 asset class which had not yet been built and had no track record.

The profit was going to be created from the difference between the off plan purchase price and the built valuation, whilst income would be split 50%/50% between the purchaser and the lettings management company.

My concern was that after 6/7 years none of the properties had been built and therefore the supposed values were academic.

I usually work on the principle, if I would not invest my own money then I would not recommend to others, sadly I did not bite and therefore I have not earned the 100k's in commissions nor can I tell people I own an infinity pool with beds

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Chris F

Jan 22, 2013 at 13:05

Seriously - if any adviser recommended Harlequin either they did zero due diligence, or they were attracted by the high commissions.

The whole think stank and stinks to high heaven. Nothing stacked up. The firm are litigious in the extreme and use(d) cease and desist notices liberally in order to quiet any questions or criticism on online forums.or blogs.

The developer was/is using new money to build existing properties and it, at best, looked like a not very well hidden ponzi scheme.

Having said that, they used some z list rugby player to endorse it, so it must be ok. Shame on him too.

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Mark Jeffries

Jan 26, 2013 at 12:35

To Chris F

Would also add that a number of 'I'FAs also are sales agents for overseas property investment companies marketing Harlequin - massive conflict of interest.

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Arthur Schopenhauer

Jan 26, 2013 at 13:22


I think you will find that many of those IFA's who care little for the responsibility to clients are no longer in the business

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Arthur Schopenhauer

Feb 03, 2013 at 19:07

We have seen this all before with similar lynch mob characteristics


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