The ombudsman has ruled against an advisory firm over a Sipp transfer for which the introducer was unregulated, despite “limited evidence” it was providing advice.

Mrs S complained about Cumulus Investment Management Limited to the Financial Ombudsman Service.

The FOS has ruled she should be compensated, saying the firm should not have accepted the business.

Mrs S wanted to take her pension at age 55 but is now unable to do that having invested in an Eastern European fund which failed.

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In 2013 Mrs S was contacted by an unregulated introducer to review her pension plans. She found out about the Sipp and the Cumulus Property Fund from the unregulated introducer.

At the time of advice Mrs S was aged 53. She was receiving a pension of £124 a month from a former employer’s pension scheme and she had a personal pension worth about £24,500. She had £6,000 in a savings account and no other assets or investments.

Mrs S signed a Sipp application form in December 2013, the FOS papers stated, with Cumulus recorded as her adviser. The form had a section called ‘Nature of initial advice’. This had three questions. He could select from pre-determined answers.

It was ticked that:

•  The sale was transacted ‘at distance’.
•  Cumulus didn’t specifically advise the Sipp to Mrs S.
•  Cumulus didn’t advise on the suitability of transferring from other schemes.
• Cumulus was recorded as the regulated firm.

The transaction went ahead and £24,910.72 was transferred into Mrs S’s new Sipp. Most of that sum was then invested into an Eastern European Property Fund.
Redemptions from the fund were suspended in June 2015. A letter from Cumulus to investors from September explained this. The Sipp provider went into administration in February 2016.

No response was received from Cumulus after an adjudicator initially looked at the case.

Ombudsman Roy Milne said it had been an unsuitable and “a high-risk” investment for Mrs S.

Mr Milne said: “Cumulus was arranging the Sipp for Mrs S. And it knew the investment was to be made into the Cumulus Property fund. Although it was acting as a financial adviser, it was trying not to provide advice.

“I don’t think there is clear and credible evidence that this was a true execution only sale. But, there is limited evidence about whether Cumulus gave advice. On balance I think it likely that advice was given by Mr H from the unregulated firm.

“I think Cumulus should have treated the transaction with some caution. The question is whether Cumulus should have accepted the business. And in answering that question Cumulus had to keep in mind its regulatory responsibilities. I don’t think Cumulus should have accepted the business.”

The ombudsman said it had considered there to be a “clear conflict of interest” too, though Cumulus had denied this on another case. The FOS found the firm’s directors had a “financial interest in the fund and therefore directly benefit from a capital inflow”.

Mr Milne said: “The sole purpose was to invest in an unregulated fund where two of the directors were also directors of Cumulus. They also knew that the introducer was unregulated.

“I think all of the factors above mean that Cumulus should have treated this application with caution. I don’t think the investment should have been arranged; or not arranged without making further enquiries.

“And I think if further enquiries had been made it would have been established that Mrs S should not have been sold the Sipp, or invested in the fund. In my view, the failure to act in Mrs S’s interests has caused the loss.”