Forward of the brand new Client Responsibility necessities, the FCA has warned SIPP operators to make sure requirements of conduct are excessive amid issues about issues within the sector.
The FCA mentioned SIPP operators should put together for the extra necessities that the Client Responsibility will convey, together with making certain acceptable methods and controls and operational and monetary resilience.
In a ‘Expensive CEO’ letter despatched on Friday afternoon the watchdog set out its views on the important thing harms within the SIPP operator portfolio.
It additionally detailed its expectations as to how companies ought to mitigate the harms and the way its expectations in these areas will likely be enhanced by the Client Responsibility.
The warnings come after a string of SIPP agency failures and an increase in complaints about SIPPs to the Monetary Ombudsman Service and the Monetary Providers Compensation Scheme.
The FCA’s issues about SIPP operators embrace:
• agency failures inflicting disruption of service for customers or transferring further prices to them (together with doubtlessly unauthorised cost costs if a scheme is wound up and belongings given to members)
• customers failing to obtain truthful redress when it’s due or not receiving it in a well timed method, notably when companies have did not conduct ample due diligence
• pension scams and fraud, in addition to customers being allowed to make investments which shouldn’t be accepted of their SIPP, together with non-standard belongings which fail or grow to be illiquid and lose all or most worth
The watchdog mentioned it remained centered on a number of priorities, together with monetary assets, complaints dealing with, due diligence and product governance, with a further space of deal with methods and information.
The FCA mentioned it nonetheless sees examples of customers having to attend too lengthy to obtain redress with some companies in search of to delay, problem or refuse to fulfil their obligations.
It instructed companies: “The place you determine recurring or systemic issues (from complaints or in any other case), it’s best to proactively and promptly think about whether or not it’s acceptable to offer redress – or a correct alternative to acquire it – to prospects who might have suffered detriment on account of these issues however haven’t but complained, or have unresolved complaints both along with your agency or the Monetary Ombudsman Service.”
The regulator mentioned there stays a big variety of customers with excellent due diligence complaints on the Monetary Ombudsman Service.
The FCA mentioned: “We count on to see a big change in companies’ behaviour in direction of upheld complaints because of this to fulfill the requirement to behave in good religion.”
It mentioned it expects SIPP suppliers to proactively determine customers who’re due redress and be sure that they obtain it promptly.
It mentioned: “When your agency handles due diligence complaints, we count on you to think about steering and up to date selections from the Monetary Ombudsman Service in figuring out your strategy.
“The place complaints or different root trigger evaluation highlights systemic points or that the acts or omissions of the agency have brought about foreseeable hurt to customers, you’re taking no matter steps are vital and (from 31 July 2023) meet the requirement to behave in good religion in direction of these customers.”
Due to the excellent complaints on the FOS, the FCA mentioned it stays involved about the opportunity of additional agency failures over the subsequent 12 months.
To counter that it requested companies to make sure they precisely calculate their liquid capital requirement and maintain liquid capital to fulfill it.
It additionally instructed companies to have proportionately thought of the dangers to which they’re uncovered and the quantity of danger that poses when assessing the adequacy of their monetary assets, and often replace the issues on an ongoing foundation.
The FCA added that companies should guarantee they maintain ample monetary assets – in order that they’ll enhance the probabilities that the agency can put issues proper once they go mistaken (resembling by paying redress) and minimise hurt if it fails and exits the market.
Lastly, the watchdog mentioned companies should guarantee their wind down plan is saved updated and to inform the FCA instantly in the event that they conclude that they don’t seem to be holding ample monetary assets or are involved in regards to the agency’s means to fulfill its money owed as they fall due.
