This post was written by Ciara Davies

The Financial Services Ombudsman (FOS) has found an advice network liable for the whole loss suffered by their client for advice given to transfer his personal pension into a SIPP, which failed to assess the underlying investments.  To read the decision please click on this link.


The client, Mr P, was given advice by an appointed representative of The On-Line Partnership Limited (On-Line) to switch his personal pension to a SIPP. Mr P transferred his personal pension to a SIPP in order that he could invest in three (now worthless) unregulated collective investment schemes (UCIS). Mr P was given advice to invest in Green Oil Plantations Limited, The Resort Group and Store First by Bragagnini Associates Financial Solutions Limited. As Mr P was not a sophisticated, professional or high net worth investor, he believed these investments were unsuitable for him.

On-Line argued that its advice was limited to the SIPP and was not provided as to the investments. However, the FOS found that On-Line had a duty to make a suitable recommendation to Mr P and that included in relation to the underlying investments that he intended to make. Crucially, that was the case even where another party had given advice on those investments. On-Line had a duty under the relevant rules, in particular COBS 2 and COBS 9, to act in Mr P's best interests and to give suitable advice to him. The FOS found that On-Line would be unable to comply with these duties without taking account of the investments which the SIPP was put in place to facilitate. The investments were not suitable for Mr P, as they were high risk and resulted in a lack of diversification.

The FOS made reference to an alert issued by the FSA in 2013 that stated that "if you give regulated advice and the recommendation will enable investment in unregulated items you cannot separate out the unregulated elements from the regulated elements". The decision of the FOS was intended to be consistent with the general comments from the regulator that when advice is given to transfer a personal pension to a SIPP, consideration must be given to the suitability of the overall proposition.

The FOS also denied On-Line's argument that the transaction was execution only. The Ombudsman concluded that the transaction was clearly not execution only as On-Line gave a recommendation as to the SIPP.

Those of you who have been monitoring the regulatory development of SIPPs will note that this decision perhaps seems contrary to Russell Adams v Carey Pensions (for a reminder of the details of this case please read a comprehensive review on our website). In particular, the High Court in Carey found that the fact that an underlying investment was high risk and speculative, was entirely different to saying that the investment was manifestly unsuitable. However in Carey the claim was against the SIPP operator as opposed to the adviser and, as such, the essence of the contract between the parties and the duties owed by the authorised firm are somewhat different to the On-Line FOS decision.  No doubt however this case, and the FOS's approach to it, will continue to form an interesting part of the current SIPP narrative.