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One Sipp firm still failing FCA cap ad requirements

One Sipp firm still failing FCA cap ad requirements

One Sipp provider is still failing to meet the Financial Conduct Authority’s (FCA) capital adequacy requirements.

The new cap ad requirements came into effect on 1 September 2016. They require Sipp providers to hold higher amounts of capital reserves on their balance sheets depending on the amount of non-standard assets they hold.

Last March a freedom of information (FOI) request by New Model Adviser® revealed that four Sipp firms had failed the cap ad requirements. This figure went down to three firms as of 31 May 2017 and then down to one firm as of August 2017 according to an FOI published on the FCA’s website.

A newly submitted FOI has shown one Sipp provider is still failing to meet its cap ad requirements as of 31 December 2017. The FCA would not disclose which Sipp operator this was.

Mark Smith, chief operating officer for Mattioli Woods, said there are difficult choices for the regulator over this firm.

‘From what we have seen with our own experience with Stadia Trustees, the FCA was working with that firm over a period of time to try to get them into a position where they could meet the requirements,’ he said.

‘The challenge for the FCA is how long do they leave that running for because you do have a period of time where the firm isn’t meeting the regulatory requirement and the FCA will want that position resolved but all of that does take time. The risk for the FCA is if they take enforcement action during that period then there is the potential for that firm to effectively fail and all members could be trapped within that pension scheme.’

Smith said the FCA has two options for dealing with the firm:

  • put in place a plan for the firm to put more capital into the business;
  • or put in place action plan to help clients exit the business either through a sale or for an orderly wind up of the Sipp.

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