Berkeley Burke Sipp Administrator has appointed RSM Restructuring Advisory as its administrator.
The firm was forced to declare insolvency following a series of legal complaints regarding its acceptance of high-risk non-standard investments into its non-advised Sipps, said the Financial Conduct Authority (FCA).
Berkeley Burke appointed RSM on Wednesday, with a sale to Hartley Pensions confirmed that same day.
This marks the second acquisition of a failed Sipp company by Hartley in the last two months, after it acquired GPC Sipp in August 2019.
Clients not happy
In 2017, the Financial Ombudsman Service (FOS) upheld complaints against Berkeley Burke related to the due diligence carried out before accepting high-risk investments.
The FOS ordered the firm to pay its customers back.
But the Sipp firm appealed the Ombudman’s decision through a judicial review, although unsuccessfully.
At the same time, 28 customers took legal action against it for similar claims.
While it was granted leave to appeal the judicial review, Berkeley Burke could not afford the costs of doing so, forcing it to declare insolvency.
Compensation or not?
The Financial Services Compensation Scheme (FSCS) told International Adviser that claims will be considered on a case-by-case basis to establish the liability for the customers’ loss.
IFA clients who had been advised to make such investments in Berkeley Burke Sipps could get some money back.
But, according to the FCA, some people may have invested on a non-advised basis.
This could mean that they are held liable for their own losses and, therefore, are ineligble to claim compensation from the FSCS.
‘Massive impact’
Glyn Taylor, partner at APJ Solicitors, who has been handling many of the claims against Berkeley Burke said it “has gone into administration as it was unable to cover the costs of defending redress claims made against it due to the firm’s alleged due diligence failings when accepting high risk investments”.
“We predicted Berkeley Burke would opt for insolvency ahead of the high court appeal, which was scheduled for next month, as it was unable to pay the interim £1m ($1.24m, €1.13m) to the group litigation claimants, and also relied on a form of crowdfunding to pay its legal costs.
“It was extremely likely that Berkeley Burke would have lost the appeal, as it would have had to prove that the Ombudsman created a new duty of care, far beyond what was in place at the time.
“We believe the appeal won’t go ahead on 15 October [2019]. The recent developments will have a massive impact on this case and we are currently seeking expert opinion over what happens next with the judicial review.
“If you have invested with Berkeley Burke your money should not be impacted, as your money is not invested in the Sipp provider, but held separately in the specific investments you have chosen and won’t be taken by creditors.
“Claimants will be able to pursue their claims through the FSCS, where they will be able to potentially claim back up to £85,000.”
Establishing due diligence
In the meantime, the FSCS has opened claims against the Sipp firm.
“[The] FSCS is working closely with the firm’s administrators RSM and is investigating the practices of [Berkeley Burke],” the lifeboat scheme said.
“[The] FSCS is seeking specifically to establish what levels of due diligence were carried out by the firm, prior to permitting customers to make specific investments under their pensions.
“Firstly, we need to establish whether there are protected claims against [Berkeley Burke]. For this to happen we need to be clear that [Berkeley Burke] owes a civil liability to customers.
“We’re aware that many [Berkeley Burke] customers were advised by independent financial advisers (IFAs) to transfer existing pensions into a [Berkeley Burke Sipp].
“Following the pension transfer, customers had their pension funds placed in high-risk, non-standard investments, many of which have become illiquid.”
