The AMPS Committee has written to FSCS to ask for its urgent comments on statements made in its Plan and Budget 2018/19, and in a “Summary note on the basis of claims for the three SIPP operators declared in default” published on 19 January 2018, in which FSCS signals its acceptance of claims against those operators based on factors including alleged “failing to carry out any due diligence on the underlying investment held in the SIPP”.

The AMPS Committee has challenged the FSCS’s 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.

In the letter AMPS chairman Zachary Gallagher said: “The FSCS would seem to be premature in its presumption that a SIPP operator was responsible in law for “due diligence” on investments chosen by SIPP members, at a time likely to be material in actions resulting in claims seemingly accepted by FSCS.

“AMPS’ understanding is that this alleged responsibility is relevant to an application for Judicial Review by a SIPP operator against which that same presumption has been applied in a determination of the Financial Ombudsman Service, and that the result of that prospective Judicial Review could affect many SIPP operators.

“The action of the FSCS might therefore be seen as potentially prejudicial both in the pending application for Judicial Review and to the interests of SIPP operators generally. In its summary note, the FSCS cites a range of responsibilities purportedly lying with SIPP operators but for which the basis of such presumption is not stated in the note. The AMPS Committee is concerned that the FSCS risks going far beyond its function of acting as fund of last resort.”

Gallagher added that likely implications could be increased risk of SIPP operator failure, as operators face the cost of defending claims seemingly encouraged by the FSCS’s action; and 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”.

“Our letter to FSCS invites it to consider the legal basis of those responsibilities presumed to lie with SIPP operators; to clarify its position as a matter of urgency; and to declare a moratorium on compensation payments pending clarification of the legal position. The FSCS’s intervention seems ill-timed and reckless.”

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