On 30 September 2021, the FCA published a Warning Notice Statement (21/2) in respect of Warning Notices that it had issued to three unnamed individuals on 10 August 2021 relating to their involvement in what the FCA describes as a pension scam.
The FCA explained in the Warning Notice Statement that it considers that these individuals colluded in recommending to customers that they transfer their existing pension funds into a self-invested personal pension (SIPPs) which would then be invested into certain high-risk and mainly illiquid investments in investment companies seeking to raise funds. In return for the individuals making such recommendations, the investment companies made substantial marketing and other payments to the individuals, totalling approximately £5.9 million.
The FCA considers that the advice provided was unsuitable for those customers and exposed them to a significant risk of detriment and that in many cases those customers suffered losses. The FCA’s view is that these individuals were motivated by financial benefit and also deliberately concealed their receipt of marketing commissions and other payments from their customers, and that each of the individuals therefore failed to act with integrity in breach of Principle 1 of the FCA’s Statements of Principle.
The individuals are not named in the Warning Notice Statement but the FCA has confirmed that the subjects of the Warning Notices are an individual working at a retail advisory stockbroker and two individuals working at an independent financial advisory firm. The FCA is proposing to take regulatory action against each of these three individuals including imposing financial penalties. These individuals have the right to make representations to the FCA’s Regulatory Decisions Committee which will decide whether any breaches have occurred and on the appropriate action including any sanction (which would require the FCA to issue Decision Notices).
These Warning Notices are the latest in a number of actions taken by the FCA against firms and individuals involved in the transfer of customers’ existing pensions to SIPPs, showing that this remains a key area of focus of the FCA. In December 2020, the FCA published a Final Notice issued to an IFA, LJ Financial Planning Ltd, in connection with SIPP pension transfers and conflicts of interest. In August this year, pending the outcome of a referral to the Upper Tribunal, the FCA published a Decision Notice against an individual in connection with transfers of defined benefit pensions to alternative pension arrangements.