The Financial Services Compensation Scheme’s (FSCS) recent decision to pay victims of three Sipp providers could put other firms out of business, warns the Association of Member-Directed Pension Schemes (Amps).
The trade body wrote a letter to the FSCS warning that the decision increases the ‘risk of Sipp operator failure, as operators face the cost of defending claims seemingly encouraged by the FSCS’ action’.
The letter also addressed concerns that the move could create ‘an effective transfer to the wider industry of responsibility for prospective losses on investments for which Sipp operators had no regulatory authority to advise in favour of or against, and no proven responsibility for due diligence.’
In all three cases, it was deemed that due diligence on some investments were inadequate.
Now, Amps is challenging the fund’s decision to accept claims against firms that are already out of business.
Concerns have been raised that the move could encourage a growing number of people to seek compensation, even if no mis-selling has taken place. Many fear that firms may be investigated unnecessarily and, in serious cases, could be forced out of business.
Amps chairman Zachary Gallagher said: “The Amps committee has challenged the FSCS’ apparent presumption that claims against named Sipp operators would have succeeded, and the corollary that FSCS should assume responsibility for those claims in its capacity as statutory fund of last resort for customers of authorised financial services firms.”