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Is the FCA Obstructing Government Policy?

Regulation news for Financial Advisers and Paraplanners

27 Aug 2019

Is the FCA Obstructing Government Policy?

A recent meeting of industry representatives looking at the Berkeley Burke SIPP defence in their appeal against the FOS has led them to draw some worrying conclusions about the way the Regulator has been going about their business, especially with regard to this specific case.

Berkeley Burke’s SIPP subsidiary believed its task was to administer the creation and running of Self-Invested Personal Pensions.  This handed them the burden not only of completing the day-to-day fund administration, but also of ensuring that funds received were money laundering compliant and that those investments were acceptable to HMRC. That was certainly the task until SIPP Providers became regulated. 

It was at this point that the subsidiary found themselves exposed to all the FCA’s “Principles for Businesses”, even though they had no voice in their creation. This in turn gave FOS the ability to widen the burden on SIPP Providers retrospectively. 

With this in mind, Berkeley Burke objected and, unlike a number of other SIPP providers who found themselves at odds with the FOS, they went to the High Court to fight their case in Ocotber last year.  They lost, but were granted the right to go to the Appeal Court. Their case should be heard in October this year. 

In a Judicial Review, it's not unusual to find all the counters are stacked with the authority and against you.  But, in an Appeal Court case, the battlefield is fairly level which is why this case is of extreme importance to the sector.

It is no longer just about a Leicestershire SIPP provider who has fallen foul of retrospectively applied rules, but has instead become about the power of the FOS and the FCA to use “principles” to change the game at will. 

This is why it critical that other SIPP providers join in this action and that advisers take a keen interest in proceedings too.

If FOS wins, they will use this precedent as a hammer – not only on other SIPP players but also on all advisers, particularly with any Execution Only business. If Berkeley Burke wins, we can make terrific strides in making regulation more accountable.

One of the arguments that will be deployed will be that the regulator is obstructing Government Policy. In the case of SIPPs, HM Government has decided that there should be Self Invested Personal Pensions. These are plans in which individuals decide in what assets they wish to invest.

It has also decided through numerous Finance Acts what are acceptable investments for those pensions; generally the unacceptable investments are those giving rise to tax charges, such as residential property, antiques, fine wines etc. 

However, the FCA and FOS have decided that these individuals cannot be allowed to invest without the SIPP company and adviser effectively acting as Guarantor. This in turn exposes regulated parties to an interesting dilemma.

Let us imagine that the SIPP is used to buy the firm’s premises off the owner and make those premises an asset of the SIPP. Bog standard stuff. 

Let us now go forward 10 years and that same director is about to retire. He has sold said business on but the new owners have bankrupted it so there is no longer any rental income and the building has now been hit by planning blight so it cannot be sold. 

Whilst investing in property is standard stuff, does the retiring director, who is now maintaining a property with no SIPP income, have a case against the SIPP firm and or the adviser? Should the SIPP firm have a responsibility to intervene at the time of the firm’s sale to ensure the new owners and de-facto renters are competent?

The case put forward by FOS in the BB case was that every investment needed to be investigated to a very intrusive degree. This included flights to foreign climes and in effect an auditing of the business and its future – all for a SIPP set-up fee of just £250.

Similarly, Pension Freedoms granted individuals the freedom to do what they wanted with their pension pots. The FCA decided that they would butt into this by demanding that consumers could only action Government policy if they had taken advice or had at least been given a range of ‘risk warnings’ after being interrogated by their pension provider.

This and other examples begs the sort of question courts love to ponder. What gives this quango the right to gainsay and compromise Government policy approved by a majority vote in the House of Commons? 

Libertatem will be offering help as requested, both because it’s an important case that affects every adviser but because the Berkeley Burke advisory firm is a member. 

After the huge expense of a five-year legal fight, Berkeley Burke is looking for financial help from those with a stake in the outcome in order to keep the case going to Appeal. The financial services industry needs Berkeley Burke to win this case.  You can donate to their appeal via Paypal by sending your donation to donations@libertatem.org.uk. 

Meanwhile, we are working on the way that support can be given. The next Blog will explain more. 

In the meantime, lend your support and show solidarity with BB by joining Libertatem today by clicking on the link below.  Fees start at just £20 per month and every penny received goes towards making a significant difference to the way our profession is run and regulated.

Join Libertatem Today from just £20 per month

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