Ombudsman rules in client's favour over Sipp related complaint

The Financial Ombudsman Service has ruled in favour of a client who complained over advice to transfer the value of his protected rights into a new Sipp. The complainant, known only as Mr M, told the FOS that The Falcon Group, acquired in 2008 by Lighthouse Group, advised him to invest in Splash Broadcast Ltd.Mr M signed to invest £30,000 in Splash in June 2009 but it later went into liquidation without any return to him.Lighthouse told the FOS there was no evidence Falcon advised Mr M to invest in Splash.An FOS adjudicator investigated the complaint and noted that the investment in Splash was made using that part of Mr M’s pension funds that were in the form of protected rights.In a letter to Mr M on 18 December 2008, Falcon recommended he transfer the value of his protected rights into a new Sipp.It said: “In uncertain times, the more minds the better and having provided active advice on your self-invested plan we discussed whether, following recent changes in legislation, there is merit in consolidating the value of your Protected Rights policy and your existing Sipp into one over arching arrangement.“When glimmers of recovery are sighted, fortune will favour the fleet of foot and if you are to be in a position to take advantage of opportunities it will be have capital earmarked for possible investment on the same radar screen.”Falcon also recommended that Mr M switch his protected rights into cash, so that: “The proceeds from this fund will add to existing cash on deposit to create a ‘war chest’ of approximately £46,000 held available to seize any opportunities considered to have merit as the market position develops.”Falcon arranged for Mr M’s pension to be transferred into another Sipp in April 2009. The adjudicator said that the initial Sipp could not accept direct investments in unlisted companies while the Sipp set up in April 2009 could.Lighthouse rejected Mr M’s complaint. It said it had told Falcon there needed to be clear separation between its authorised activities and the promotion of unlisted investments such as Splash.An FOS adjudicator, who initially looked at the case, referred to an alert issued by the Financial Services Authority in January 2013. This warned over advice to customers for switching without assessing the disadvantages of investments proposed to be held within the new pension, with particular reference to Sipps.Ombudsman Terry Connor said: “It is my view that the advice to transfer in 2008 and again in 2009 should have considered how the protected rights were to be invested.“Without any plans on how his pension funds would be invested, Falcon could not “take account of the overall investment strategy the customer is contemplating.” And Mr M was losing potential investment growth because of the advice.“So, in my view, the transfer in 2008 to a Sipp, leaving funds uninvested, was unsuitable.”He said: “I think the transfer into the second Sipp in 2009 was solely to facilitate the investment in Splash. I have not seen persuasive evidence to show that Falcon could or did separate its authorised activities from the promotion of the unlisted investment.“But the advice to transfer again might have been given without any intention to invest directly in Splash. In that case, Falcon again could not have taken any account of the overall investment strategy.”He ordered Falcon to pay ‘fair compensation’ based around a number of calculations, including the transfer value that would now exist had it not advised Mr M to transfer his protected rights in 2008.

Ombudsman rules in client's favour over Sipp related complaint

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