New Model Adviser - For Professional Investors

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

FCA weighs action on non-standard Sipp investments

Regulator asks Sipp firms for more information on the DFMs they are working with.

FCA weighs action on non-standard Sipp investments

The Financial Conduct Authority (FCA) has questioned Sipp providers about high-risk investments they hold as it considers whether to take action on a market that has seen a high number of complaints in recent years. 

The regulator has asked Sipp providers to reveal how many non-standard assets they hold and how these assets arrived with them. This includes looking at discretionary fund managers (DFMs) and the advisers who recommend investments to pension savers 

A non-standard asset is one which cannot be accurately valued and readily realised within 30 days. Such assets, or non-standard investments (NSIs), tend to pose a high risk of loss to investors, and some NSIs have been connected to scammers. 

The FCA said it would 'use the information to help inform any decisions on whether we wish to undertake further supervision work within this area'.

It is the second time in two years that the FCA has asked Sipp providers to answer questions on NSIs. Unlike the request sent in 2015, the regulator has focussed on the role DFMs have in holding NSIs. 

‘We are asking for this information because we want to understand the level and type of NSI's held within Sipps and DFMs in order to have a better overview of the market and compare this information to our 2015 data request, which requested similar (but not identical) information to identify any trends or themes,’ the note to Sipp firms, seen by New Model Adviser® said.

In January the FCA published a warning to Sipp providers which said scammers are ‘becoming increasingly sophisticated’ and the ‘third generation’ of scams are using DFMs to hide the nature of the underlying investment.

The FCA also requested information about:

  • financial advisers that advised their clients to invest in NSIs; 
  • financial advisers that submitted business on an execution only or insistent client basis;
  • investments in an NSI that were made through an unregulated introducer; and 
  • customers that invested on a self-directed basis.

Compensation claims about Sipp investments have risen over the last three years. In the year ending 31 March, the Financial Services Compensation Scheme received 3,565 complaints from consumers in connection to advice they received to transfer into 'risky assets' within Sipps. The lifeboat fund paid out £105 million in connection to these complaints.

The information request follows the FCA recently announcing further supervisory work on Sipp operators in April. The FCA declined to comment on the questions sent to Sipp providers. 

Share this story

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
More Content

BUSINESS

Tilney posts £9.5m loss as compliance and staff costs escalate

Tilney posts £9.5m loss as compliance and staff costs escalate

Tilney Group posted a £9.5 million pre-tax loss in the year to December 2017, despite generating an eye watering £226.5 million revenue.

ADVICE

Tax Doctor: Aussies keep options open to protect property portfolio

Tax Doctor: Aussies keep options open to protect property portfolio

Despite their desire to retire in the UK, Dominic and Laura would be wise not to transfer any superannuation cash over from Australia as it would be subject to inheritance tax

twitter_banner

INVESTMENT