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24 Oct 2012

Investors At Risk As FSA Finds Non-Compliant SIPP Operators

Self invested personal pensions (SIPPs) pose a significantly higher risk for clients due to poor compliance with regulatory requirements among operators, according to the latest SIPP operators thematic report released by the Financial Services Authority (FSA) on Tuesday.

Regulatory compliance was particularly poor in the area of risk planning and mitigation. In addition, most of the SIPP operators visited by the watchdog could not clearly show the application of the FSA´s Client Money and Assets rules (CASS) to their business structure. In some cases, this resulted in a lack of adequate protection of clients´ assets, meaning clients could face loss in the event of failure of a non-compliant SIPP.

The report also showed that some SIPPs had inadequate control over the investments they held.

The regulator concluded that the findings made it clear that the inadequate control of SIPP operators´ businesses could pose a great risk to consumers. As a result, the FSA is planning a programme of coordinated work designed to raise standards across the industry.

A number of consultation papers and a policy statement would be released later this year as part of the programme, implementing some changes and proposing others. Through the amendments, the regulator will aim to strengthen the regime for SIPP operators regarding capital requirements, disclosure and inflation-adjusted projections.

In addition to the changes, more supervisory work across the industry would be undertaken by the FSA, focusing on several areas, including the ones mentioned in the report.

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