Lawyers representing embattled SIPP provider Berkeley Burke argued the firm would have needed to “peer into a crystal ball” to understand the level of due diligence the Ombudsman would come to require of it.
Speaking at a judicial review hearing taking place in London today (10 October), a lawyer representing the self-invested personal pension (SIPP) provider, Jonathan Kirk, suggested the firm would have needed a crystal ball to to know what the financial ombudsman service would ask of it years after an unregulated investment into one of its SIPPs was made.
Berkeley Burke is fighting a 2014 Financial Ombudsman Service (FOS) decision in which the ombudsman ruled the SIPP provider had to compensate a client after it failed to carry out appropriate due diligence on his investment.
In June 2014, the FOS ruled Berkeley Burke failed to ensure high-risk unregulated investment scheme Sustainable Agro Energy, which sold plots of land in Cambodia on which trees would be planted to create bio-fuel, was unsuitable for Wayne Charlton’s £29,000 pension pot. The investment scheme was later found to be fraudulent.
In court on Wednesday, Berkeley Burke’s lawyers maintained the same line of defence as it has over the past few years – that the firm was not responsible at the time of the investment for the due diligence the FOS now expects of it.
Kirk suggested the FOS ruling had taken into account tighter rules around the due diligence requirements of SIPP providers, brought in from 2014, rather than considering the law at the time of the investment in 2011.
Kirk said: “The responsibility of a SIPP administrator has to be proportionate to what they are doing. It is unfair to have expected them to do [heavier due diligence]. We’d have to peer into a crystal ball to know that was our obligation in 2011.”
The initial FOS decision suggested the firm should have looked at evidence the trees had been planted for the bio-fuel, that there was an adequate market for the product, whether it complied with domestic laws and regulations, as well as question the projected high return.
Kirk continued: “If the ombudsman is right… [it] means this is a whole different playing field, a whole different set of requirements.”
The case is ongoing.