FCA warns SIPP firms on Consumer Duty

Ahead of the new Consumer Duty requirements, the FCA has warned SIPP operators to ensure standards of conduct are high amid concerns about problems in the sector. The FCA said SIPP operators must prepare for the additional requirements that the Consumer Duty will bring, including ensuring appropriate systems and controls and operational and financial resilience. In a ‘Dear CEO’ letter sent on Friday afternoon the watchdog set out its views on the key harms in the SIPP operator portfolio. It also detailed its expectations as to how firms should mitigate the harms and how its expectations in these areas will be enhanced by the Consumer Duty. The warnings come after a string of SIPP firm failures and a rise in complaints about SIPPs to the Financial Ombudsman Service and the Financial Services Compensation Scheme. The FCA's concerns about SIPP operators include: • firm failures causing disruption of service for consumers or transferring additional costs to them (including potentially unauthorised payment charges if a scheme is wound up and assets given to members) • consumers failing to receive fair redress when it is due or not receiving it in a timely manner, particularly when firms have failed to conduct adequate due diligence • pension scams and fraud, as well as consumers being allowed to make investments which should not be accepted in their SIPP, including non-standard assets which fail or become illiquid and lose all or most value The watchdog said it remained focused on several priorities, including financial resources, complaints handling, due diligence and product governance, with an additional area of focus on systems and data. The FCA said it still sees examples of consumers having to wait too long to receive redress with some firms seeking to delay, challenge or refuse to fulfil their obligations. It told firms: “Where you identify recurring or systemic problems (from complaints or otherwise), you should proactively and promptly consider whether it is appropriate to give redress – or a proper opportunity to obtain it – to customers who may have suffered detriment as a result of these problems but have not yet complained, or have unresolved complaints either with your firm or the Financial Ombudsman Service.” The regulator said there remains a significant number of consumers with outstanding due diligence complaints at the Financial Ombudsman Service. The FCA said: “We expect to see a significant change in firms’ behaviour towards upheld complaints as a result to meet the requirement to act in good faith.” It said it expects SIPP providers to proactively identify consumers who are due redress and ensure that they receive it promptly. It said: “When your firm handles due diligence complaints, we expect you to take into consideration guidance and recent decisions from the Financial Ombudsman Service in determining your approach. “Where complaints or other root cause analysis highlights systemic issues or that the acts or omissions of the firm have caused foreseeable harm to consumers, you take whatever steps are necessary and (from 31 July 2023) meet the requirement to act in good faith towards those consumers.” Because of the outstanding complaints at the FOS, the FCA said it remains concerned about the possibility of further firm failures over the next 12 months. To counter that it asked firms to ensure they accurately calculate their liquid capital requirement and hold liquid capital to meet it. It also told firms to have proportionately considered the risks to which they are exposed and the amount of risk that poses when assessing the adequacy of their financial resources, and regularly update the considerations on an ongoing basis. The FCA added that firms must ensure they hold adequate financial resources – so that they can increase the chances that the firm can put things right when they go wrong (such as by paying redress) and minimise harm if it fails and exits the market. Finally, the watchdog said firms must ensure their wind down plan is kept up to date and to notify the FCA immediately if they conclude that they are not holding adequate financial resources or are concerned about the firm’s ability to meet its debts as they fall due.

FCA warns SIPP firms on Consumer Duty

Related items

News from Twitter