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FCA chief sounds Sipp collapse alarm in Dear CEO letter

Financial Conduct Authority (FCA) chief executive Andrew Bailey issued a 'Dear CEO' letter to Sipp providers warning about pending civil claims in the High Court regarding Sipp due diligence obligations.

FCA chief sounds Sipp collapse alarm in Dear CEO letter

Financial Conduct Authority (FCA) chief executive Andrew Bailey has told Sipp providers they must consider whether they can pay out for potential compensation claims. 

A 'Dear CEO' letter sent to Sipp operators today, and seen by New Model Adviser®, draws attention to the judgement handed down today in the Berkeley Burke SIPP Administration Limited v. Financial Ombudsman Service (FOS) case, along with several other pending claims. 

The cases primarily deal with Sipp operators' due diligence obligations when accepting customers' investments. 

Bailey (pictured) wrote: 'Pending the outcome of any appeal of today's judgement and these other cases, we expect you to consider the potential implications of them for your firm and its customers. We will be contacting Sipp operators to discuss what these may be. 

'If the outcome of any of these cases calls into question your firm's ability both now and in the future to meet its financial commitments as they fall due, you must notify the FCA immediately.

'Where relevant, firms should also notify claims to their professional indemnity insurers in accordance with their policies.' 

Bailey said the regulator acknowledged that if a firm may not be able to meet its financial commitments, it may be in some customers' interests for part or all of its business to be sold. 

He reminded firms that FCA Principles for Business require due regard to customers' interests in the case of sale, particularly with regard to customers who may have compensation claims. 

Bailey urged firms to communicate with the regulator in an 'open and cooperative way' and disclose any proposal to sell or wind up, including in the case of a share sale, where a firm must comply with the FCA's Change of Control requirements. 

He added: 'In assessing any Change of Control applications, or applications for individuals to hold (or resume holding) Controlled Functions roles, we will take into account how those individuals have acted in the context of the considerations outlined in this letter.' 

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