The responsibility of assessing if investments are suitable for individual clients remains with the adviser or with the investor themselves.
On top of the Dear CEO letter in August 2014 the FCA set out a revised set of Sipp capital adequacy rules, requiring firms to calculate their capital requirements in relation to assets under administration, with an additional capital surcharge for the value of ‘non-standard’ assets that they administer.
Standard assets are defined as being readily realised within 30 days.
However the FCA proposed a range of amendments in a consultation launched in June with the intention to reduce the compliance costs for Sipp operators while retaining the original principles of consumer protection and market integrity.
The regulator proposes simplifying the calculation of the capital requirement. Providers will no longer need to obtain accurate quarterly valuations of all AUA.
Instead they will be expected to use the sum of the most recent annual valuations of the plans over the preceding 12 months, adjusted to include any revaluation of assets that may occur between the date of the most recent valuation and the date AUA is calculated.
In addition, the latest proposals give firms six months to raise further capital where increases in the AUA result in a higher capital requirement.
The FCA has also updated the standard asset list. Previously the list only included shares traded on Aim and the London Stock Exchange, replaced by a new definition of securities trading on regulated exchanges (which also includes bonds).
Bank deposits have been changed to deposits to incorporate building society or credit union deposits into the standard definition as the FCA expects that most deposits should meet the ‘readily realisable’ requirement, even if a penalty is applied.
Commercial property remains classified as a standard asset, unless the Sipp operator expects that a property cannot be realised in 30 days.
According to Suffolk Life’s Mr Evans, provider interpretation of these new rules may now lead to different levels of protection for investors and their assets.
