The FSCS has defended itself against suggestions it takes a punitive, enforcement approach against those firms deemed in default.

James Darbyshire, general counsel at FSCS, was speaking at the AMPS annual conference in London today.

He explained the mechanics of the FSCS claims process but was keen to point out that the scheme focuses on pragmatic financial outcomes for consumers in terms of compensation, rather than punishment of firms.

He said: “We’re not there to teach people a lesson, it’s there purely to get money back.”

He said FSCS did not pursue firms in “a quasi-enforcement way.”

Mr Darbyshire also touched on what would happen if a SIPP operator defaults.

He said a SIPP firm could fall foul of the scheme for “failing to carry out any due diligence on the underlying investment held in the SIPP.”

Other failures could include not having necessary authority from the investor to authorise the underlying investment being made via the SIPP, or failing to check that advisers who advised investors had the necessary FCA permissions.

Furthermore, a SIPP firm could be at risk if it receives information that indicated that the non-advised investors did not understand the SIPP investment.