The client who complained to the FOS, referred to as Mr A, claimed that he received unsuitable advice from an appointed representative of Sesame.

He said he should not have been advised to transfer his pension funds to a Sipp or to invest in an unregulated renewable energy project. The renewable energy project experienced ‘difficulties’ and Mr A lost his investment.

Sesame accepted that its AR, labelled as Mr H, gave pension transfer advice, and that it is responsible for that advice.

It also accepted that the pension transfer advice was not suitable, and so it offered to refund the Sipp provider’s charges.

But Sesame said it was not responsible for any advice Mr H may have given about the renewable energy project – and so it didn’t offer anything for Mr A’s investment loss.

The advice was given and the transfer made in the late part of 2009. Mr A then purchased investments associated with a renewable energy project. The FOS noted there was some confusion about the form of those investments, but everyone agreed that Mr A made some investment in an overseas renewable energy project through his pension.

Another business, named as ‘M’, was involved in the purchase of the investment. There were strong links between M and the AR – the directors of one business were also partners of the other.

Ombudsman Laura Colman said that because Sesame permitted its AR to give advice about pension transfers it was therefore responsible for the pension transfer advice Mr H gave Mr A.

In Mr A’s case, she said that “it isn’t possible to separate the pension transfer advice from the underlying investment”.

That meant Mr H “should not have given Mr A any advice about the pension transfer without also considering the suitability of the underlying investment in the energy project”, Ms Colman said.

She said: “Since Mr H did advise on the pension transfer, and Sesame did take responsibility for the pension transfer advice, Sesame was also responsible for considering whether the energy project was suitable for Mr A.

“It was not suitable for Mr A to invest the whole of his pension money into the energy project. The point of the pension transfer was to allow Mr A to invest in the project. Since the energy project was unsuitable, the pension transfer was also unsuitable.

“If the pension transfer hadn’t taken place, Mr A wouldn’t have gone ahead with the investment in the energy project.

“Regardless of the potential involvement of third parties, it is fair and reasonable for Sesame to be responsible for the whole of Mr A’s losses. Sesame should therefore pay compensation to him with the aim of putting him in the position he would have been if he’d been given suitable advice.”

Sesame rejected the conclusion, saying it strongly disagreed with any assertion that Sesame’s responsibility for the pension transfer meant Sesame was responsible for the underlying investment.
The firm stated that under its rules, its appointed representatives were expressly forbidden from recommending investments like the renewable energy project.

Sesame told the FOS that it had permitted Mr H to advise on pension transfers, but it did not permit him to advise on the project.

According to the FOS papers, “Sesame finds it difficult to understand how it can be held responsible for an investment that it did not permit its adviser to sell”.

The company expressed concerns that the findings were different to those in other similar FOS cases.

It has seen “several other cases which have progressed through your service in which both at adjudication and final decision stage, your service has agreed that Sesame cannot be held responsible for the activities of an unregulated firm or unregulated activities that they made clear under network rules were non- permissable”.

Sesame said that “the responsible body for the suitability of the renewable energy project was clearly [M] and it is also evident that when [Mr A] submitted his complaint form he was very clear about who he believed had sold him the product and that [Mr H] had confirmed to him that the investment was being carried out by his non-regulated company.

“This is because [Mr H] was aware he could not carry out this type of activity through [the AR] as it would require the approval of Sesame prior to completion which would not be granted.”

Sesame also said it was satisfied the paperwork for the investment in the renewable energy project was on M’s headed paper, not the AR’s headed paper. It is satisfied Mr A distinguished the two entities.

Sesame said there was “no evidence that Mr H gave advice about the energy project under the Sesame umbrella, and no evidence that Mr A was in any doubt that he was dealing with M rather than its AR”.

The ombudsman stuck with her provisional decision, despite Sesame protesting against it.

She concluded: “In this case, I am satisfied that the AR was authorised by Sesame to recommend the transfer to a Sipp. As a result, I’m satisfied I can consider this complaint against Sesame.

“Sesame doesn’t dispute its responsibility for the Sipp advice but says it didn’t authorise the AR to advise on the energy project. So it says it’s not responsible for this element of the business.

“I understand Sesame’s point. But the AR was required to follow the relevant rules set out by the regulator. It had an overall duty to act in Mr A’s best interests and was required to know its client and to give suitable advice.

“The AR could not have given suitable advice to Mr A on the pension transfer without considering the investment to be made. The Sipp was simply a wrapper to hold investments, and the sole reason for opening the Sipp was to make the investment in the energy project. So the investment and the Sipp transfer were closely linked.

“And it’s clear that Mr H knew Mr A was setting up the Sipp in order to invest in the energy project. In these circumstances, I agree with our adjudicator that the Sipp transfer advice can’t be separated from the investment. So, if Sesame is responsible for the Sipp, it is responsible for the investment made in it too.”

Sesame was ordered to pay compensation based on a formula provided by the FOS.