The Financial Conduct Authority (FCA) has ordered that Cambridgeshire SIPP provider DAC Pensions Limited be placed into insolvency after the firm accepted business from unauthorised introducers without the proper vetting required by the FCA.

The firm has 607 clients and administers assets of £26.7m according to the second supervisory notice published earlier this week by the regulator.

The FCA said the small SIPP provider, authorised by the FCA since September 2017, failed to carry out adequate due diligence checks on two introducer firms prior to accepting business from them. This meant that the firm failed to identify that neither of the introducers had the appropriate FCA permissions to provide non-insurance-based pension advice.

The firm had accepted approximately 620 new clients with assets under administration of £20.4m from the introducers based in Ireland and Cyprus. The introducers were passporting into the UK.

The FCA added that DAC Pensions also accepted business from one introducer despite being “explicitly informed” that one of the introducers lacked the appropriate permissions to provide pension advice.

The regulator said that as a result of accepting the business from the introducers, DAC Pensions’ customers were directed to invest their SIPPs in high-risk, illiquid investments through a model portfolio operated by the two introducer firms.

A number of these investments are unregulated collective investment schemes (“UCIS”) based overseas, which are unlikely to be suitable for retail clients. A number of these UCIS have since been unable to meet redemption requests for a significant period without explanation. The redemption issues were also not communicated to customers in a timely manner. The regulator added that it expects customers may lose some or all of the money they have invested into these UCIS.

The FCA also reprimanded DAC Pensions for failing to write to customers to fully inform them of the situation and present them with all possible complaint options.

The assets will now be liquidated and returned to clients along with a letter from DAC Pensions telling clients to bring their complaints to the Financial Services Compensation Scheme.