SIPP Providers Braced For Fresh FCA Action
Sipp firms are bracing themselves for more regulatory inspection as the Financial Conduct Authority (FCA) takes another look at the market.
The FCA has launched three thematic reviews of Sipp providers in recent years. As part of its most recent review the FCA wrote to chief executives of Sipp firms in 2014 saying it found 'unacceptable' and 'significant' failings in firms' due diligence on non-standard investments.
Since then new capital adequacy requirements came in force for Sipp firms last September, and last week the FCA said it will undertake ‘further work’ on Sipp providers, looking at non-standard assets and the culture and governance of Sipp firms.
New Model Adviser® understands that as this this FCA work is still in its early stages, it has not yet decided what form of regulatory action it will take.
Greg Kingston, group head of marketing and communications at Suffolk Life, said he anticipated the FCA’s work to revolve around following up their previous efforts in the third thematic review.
‘[I think this will look at] effectiveness of due diligence processes that were supposed to be put in place following the third thematic review, and how well Sipp operators are following those processes,’ he said. ‘It will also look at how Sipp operators are categorising standard and non-standard assets, given that their own definition left much of the decision making down to individual providers.’
Zachary Gallagher, the chairman of the Association of Member-Directed Pension Schemes (Amps), said the trade body has approached the FCA asking it for clarification as to what its work will entail.
Gallagher said he was expecting more work from the FCA but he is still not certain what it will involve.
‘I wasn’t surprised to read that [further FCA work] because we had a flurry of activity with the various thematic review and then the dear CEO letter which was in July 2014 and then the capital adequacy rules coming in last Autumn,’ he said. ‘So nearly three years on from that we would expect them to come round again and have a fresh look at things and we will work with them as we need to.
‘We have asked them if they are able to give us an indication [of what they are looking at] and at this early stage we can only speculate. But I imagine they will want to look at adherence to cap ad rules, how assets are split between standard and non-standard and what sources operators are getting their business from.’
