12 October 2018 | Comment | Article by Richard Evans

Berkeley Burke SIPP Administration –v- Financial Ombudsman Service Limited

Interested Parties: Mr Wayne Charlton and the Financial Conduct Authority

A judicial review hearing concerning Berkeley Burke’s attempt to overturn a land standing FOS decision began on 10 October 2018. The background to this case concerns a long-standing battle between Berkeley Burke SIPP Administration (“Berkeley Burke”) and the Financial Ombudsman Service (“FOS”).

Berkeley Burke is attempting to overturn a decision made by the FOS in 2014, in which it was determined that it must compensate Mr Charlton for a failure to undertake due diligence in respect to an unregulated investment following the transfer of his pension funds into a self-invested personal pension scheme.

Background

Mr Charlton invested into a self-invested personal pension which was administered by Berkeley Burke in or around November 2011. The unregulated investments in the SIPP included an investment with a company named Sustainable Agro Energy, a company based in Cambodia.  Mr Charlton suffered substantial losses following Sustainable Agro Energy entering into receivership after an intervention by the serious fraud office.

Mr Charlton subsequently brought a complaint to the Financial Ombudsman Service against Berkeley Burke in respect to the loss of his personal pension funds. These losses totalled approximately £26,000.00 in value. The essence of Mr Charlton’s complaint was that he was unhappy that Berkeley Burke allowed his pension money to be invested into a company (Sustainable Agro Energy) which subsequently went into administration.

Complaint to the Financial Ombudsman Service

In 2014, the FOS ruled against Berkeley Burke for failing to carry out adequate due diligence on the unregulated collective investment which involved Sustainable Agro Energy. In February 2017, the FOS issued a second determination upholding the original ruling but Berkeley Burke challenged the decision again.

The Berkeley Burke SIPP Administration Judicial Review

In November 2017, Berkeley Burke filed and served an application for judicial review of the second determination by the FOS (February 2017) to uphold the complaint against it by Mr Charlton.

The principal points for which Berkeley Burke seeks judicial review are as follows:

  • Where a client, on an execution-only basis, instructs a SIPP provider to include a named unregulated investment in his SIPP, is that SIPP provider under any duty to investigate whether the investment is viable and should be included in the SIPP;
  • Secondly, should a SIPP provider refuse to take on an investment if it thinks the investment is questionable, even if this goes against the client’s instructions.

Berkeley Burke makes what it calls a “specific instruction argument” and says in the second ruling that the FOS “made a material error of law…by finding Berkeley Burke was not required to execute Mr Charlton’s specific instructions.

It also makes what it calls a “consistency argument” and says the FOS’s second ruling “made a material error of law in failing to follow previous decisions made by the Pension Ombudsman Service. In response to this allegation, the Financial Ombudsman Service’s position is that it is not bound to follow previous decisions by the Pension Ombudsman Service and its focus is to determine what is fair and reasonable in all the circumstances of the complaint.

Comment and implications of the case

The current position is that the FOS considers there is an obligation on SIPP providers to undertake due diligence as to whether an investment is appropriate for inclusion into a SIPP.

Should the Court dismiss Berkeley Burke’s application for permission to seek judicial review it is anticipated that there will be a number of future complaints to the FOS based on allegations that a SIPP provider has failed to undertake appropriate due diligence in respect to potentially unsuitable investments.

Hugh James acts as joint lead solicitors in an on-going group litigation (The Berkeley Burke SIPP Litigation) with Wixted and Co Solicitors, in which approximately 164 Claimants are represented.

Hugh James also undertakes work for a number of clients who, it is alleged, have been mis-sold SIPPs and have lost pension monies due to investment into inappropriate investment schemes.

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