While firms that introduce clients to Independent Financial Advisors (IFAs) are not regulated, it is easy for them to begin to offer financial advice and offering financial advice is a regulated act.
Avacade Limited and Alexandra Associates face legal sanctions after being accused by the Financial Conduct Authority (FCA) of misleading investors and carrying out unauthorised regulated activity.
The FCA alleges that the two firms of unregulated introducers have been promoting the transfer of traditional private pensions into Self-Invested Personal Pensions (SIPPs). While many SIPPs are good investments, they can be used to invest in high-risk, unregulated schemes. The promotion of these high-risk SIPPs constitutes financial advice which should only be provided by financial advisors that are regulated by the FCA.
The companies allegedly offered a “pension report service” to clients, but were actively marketing alternative investments. As the firms were not regulated by the FCA, they were not legally authorised to advise clients on such matters.
The FCA also alleges that three of Avacade Limited’s directors were “knowingly concerned” in the company’s breaches.
The legal proceedings are still at an early stage and no trial date has been set. The FCA is seeking to ensure that investors affected by this mis-selling are compensated and that similar breaches do not occur in the future.
A SIPP is like a bucket that can hold a variety of different investments. If the SIPP holds regulated investments then investors are much less likely to have problems. Unfortunately, SIPPs have been used to invest in a variety of risky schemes, such as overseas property, forestry plantations, storage pods and renewable energy. Many of our clients have lost their entire pension funds after transferring their pensions into these risky investments. Sadly, the risks involved are often not explained to clients before they make the transfer. Instead, the projected return on investment is focussed on and in some cases, guaranteed levels of earning are promised.
The action against Avacade Limited and Alexandra Associates is the latest chapter in the general “clamping down” on this type of activity. The Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS) have dealt with numerous claims regarding retail investment clients who have been negligently advised to invest in Unregulated Collective Investment Schemes.
In its 2016-2017 Annual Report and Accounts, the FCA urges IFAs to be aware of the danger of working with unregulated introducer firms. The purpose of FCA regulation is to ensure that only “fit and proper” persons are providing financial advice. For example, since 2013 regulated advisors have been required to hold a Statement of Professional Standards (SPS) and relevant qualifications. The FCA seeks to maintain the integrity of the financial services market by monitoring the activities of regulated persons, and removing them from the market if necessary.
If you believe that you have received negligent advice regarding the transfer of your pension into a SIPP, you may be entitled to compensation for any loss you have suffered as a result.