Quilter to compensate Caerus client over advice to invest in unquoted property shares

Mr I, whose identity will remain confidential due to privacy reasons, switched his personal pension to a SIPP in late 2012 after seeking advice from an appointed representative (AR) from Caerus Financial. Quilter Financial Services bought Caerus in June 2017 and thus dealt with Mr I's complaint to the financial ombudsman.

Mr I claimed his financial adviser convinced him to invest his SIPP funds into a property investment scheme, resulting in him losing money. Mr I told the ombudsman that he was "one of many" to be misled into investing in this fund.

"I had no idea of the risks involved, the workings of the fund or high charges involved," the former client said. "I feel that (the AR) did not correctly explain the risks involved. He led me to believe that his property investment was safer than the stock market. I have been horrified to find out that my pension has been locked away in a high-risk fund, currently appears to have no value and is inaccessible."

The ombudsman found this advice was unsuitable for Mr I because it "exceeded the level of risk he was prepared to take", it was "not consistent with his financial circumstances" and he "did not have the knowledge and experience to understand the level of risk he was taking".

Caerus suspended the AR between 1 August and 6 September 2012 then again on 24 September. It then terminated his appointment on 13 December in the same year.

Quilter argued it had no knowledge of either the pension switch or share purchase, that the adviser's suspension meant he was not authorised to give investment advice and that unquoted shares were not an investment the AR was authorised to give advice on.  

The AR forwarded an email to Mr I from the company overseeing the property development (referred to as ‘company A'), consisting of planned real estate along the M25, on 27 September 2012.

It sent a "positive message about the prospects of company A" saying "investors could expect to see their investment double in value once planning permission was obtained", the ombudsman said.

An ombudsman investigator said this showed the AR was "involved in procuring investors to buy shares in company A".

Mr I said he received the advice around September 10, which sat outside of the AR's suspension period, therefore the ombudsman ruled the issue of suspension irrelevant.

The ombudsman also rejected Caerus' claim that it was unaware of the AR's actions and his recommendations sat outside the permissions granted by the firm.

The ombudsman said even if the AR breached requirements set out in the compliance manual relating to giving investment advice, it did not absolve the firm from responsibility to the AR's advice.

To compensate Mr I, Quilter was asked to obtain the notional transfer value or Mr I's personal pension based on the performance of the FTSE ALL Share Index as well as the value of Mr I's SIPP at the time of the ombudsman's decision. Alternatively the firm should take ownership of any illiquid shares by paying a commercial value acceptable to the SIPP operator.

The ombudsman also said income tax may be payable on any interest paid. If Quilter Financial Planning deducts income tax from the interest it should tell Mr I how much has been taken. It should also give him a tax deduction certificate so he can reclaim any overpaid tax from HM Revenue & Customs if appropriate. 

Quilter declined to comment.

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• Topics
• Regulation
• SIPP
• Ombudsman
• Quilter
• Caerus
• Retirement