FCA’s latest portfolio supervision letter is to SIPP operators. In the letter, FCA notes that, when SIPPs were originally launched, they were designed for higher net worth individuals looking to manage their own investments, but that, since then, SIPPS are marketed and distributed to a much wider group of customers and FCA is worried that some consumers now have SIPPs that do not match their needs. It is also concerned that some investments made available within SIPPs have turned out to be scams or fraud, resulting in several SIPP operators becoming insolvent when redress liabilities crystallise or because the cost of defending claims exceeds their financial resources. As a result, FCA’s main expectations for the sector focus on:
- financial resources, and, in particular how Principle 4 means firms may need to hold more capital than their detailed minimum requirement;
- complaints handling: FCA sees many complaints about the adequacy of due diligence firms do before accepting an investment or establishing an arrangement with an introducer. If complaints lead firms to note recurring or systemic problems, they must correct the root causes and consider whether it is appropriate to give redress to customers in similar circumstances who have not yet complained to the firm. FCA also notes an increased habit of firms to sell customer data to CMCs and says this is unlikely to be compliant with the GDPR;
- pension scams and the need for firms to take appropriate action to protect customers if they spot one – including reporting firms or individuals they suspect of being involved in wrongdoing to FCA;
- product governance and the responsibilities of SIPP operators as “providers” of financial products or services; and
- international SIPPS: expats are sometimes advised by overseas advisory firms to switch their UK pension into an “international SIPP”, but FCA considers this is not usually an appropriate action for someone investing in a UK pension scheme and says firms operating these SIPPs must ensure, among other things, that any business accepted is in their clients’ best interests.
More generally, FCA notes firms should be prepared for Brexit, should be continuing to manage the effects of the pandemic and reporting to FCA if appropriate and says it will use the SMCR to engage with individuals where it has concerns.