Upheld: Investment mis-selling complaint against Morgan Lloyd SIPP Services Limited

Decision detail

Summary

Mr L complained that ML failed to conduct sufficient due diligence on P2P investments in his SIPP, was not proactive when investments failed, and wrongly allowed excessive high-risk investments, causing him financial loss. ML accepted Mr L's SIPP application in March 2018 following introduction by Firm S Limited, an unregulated business that made misleadingly positive statements about SIPP transfers and P2P investments and was financially incentivized through 25% fee-sharing. The Ombudsman found ML should have refused the application due to significant consumer detriment risk from this introducer arrangement, but concluded Mr L would likely have found an alternative SIPP provider and invested similarly in P2P, so causation for full compensation was not established. The complaint was upheld in principle but with limited practical remedy.

The Ombudsman's reasoning

ML failed to conduct adequate due diligence on Firm S Limited as an introducer. Although ML took some steps, it drew unreasonable conclusions from what it knew or should have known. The introducer arrangement was unusual: Firm S Limited was unregulated but linked to regulated Firm S (trading style of Firm B). ML's introducer agreement was actually with the unregulated Firm S Limited, not corrected until September 2020. Firm S Limited's website made misleadingly positive statements about SIPP transfers and P2P investments, was paid by investment providers, and received 25% of ML's fees. Almost all Firm S Limited-introduced clients invested significant portions in non-mainstream, high-risk investments - a pattern unlikely to represent independent decisions. Cumulatively, these factors demonstrated significant risk of consumer detriment. ML should have concluded this before accepting Mr L's application. However, Mr L would likely have found an alternative SIPP provider and proceeded with similar P2P investments, so causation is not established for full compensation.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website