FSCS footing the bill for Berkeley Burke mistakes

Guinness Mahon could face an estimated £8.5m in liabilities

More than 700 claims have been made against Berkeley Burke, with the FSCS now facing a £158m bill.

The Financial Services Compensation Scheme (FSCS) has told FTAdviser that it has received 733 claims against Berkeley Burke’s self-invested personal pension arm since it was put into administration in September this year.

These claims, however, have not yet been passed on for processing due to the FSCS needing to first establish whether Berkeley Burke owed a civil liability to its customers.

The administrators of the failed SIPP provider have warned that the bill the FSCS will pick up is approximately £158m. Adrian Allen, the administrator, stated that it was likely the FSCS would pay “all valid client claims” to the tune of “£158m or more”. He said:

It is likely that the FSCS would pay valid claims of up to £85,000 per client, and then stand in the place of those clients with a subrogated claim against the company. This is likely to include all personal clients and the claims could be up to £158 million or more.


What happened to Berkeley Burke?

The cause of these claims was the SIPP provider accepting high-risk, unregulated investments, many of which have caused large investor losses, between 2010 and 2012.

The embattled SIPP firm was facing claims earlier this year from a group of over 177 investors, of which over 20 were Smooth Commercial clients, over losses they incurred from these high-risk investments. The investments ranged from forestry in Australia to holiday apartments in Grenada, a court document has revealed.

In a separate case, Berkeley Burke was fighting a 2014 FOS decision which stated that it had to compensate a client after it failed to perform necessary due diligence on the client’s investment.

The investment revolved around an unregulated investment scheme, Sustainable Agro Energy, which sold plots of land in Cambodia where trees would be planted to create bio-fuel.

The Berkeley Burke administrators dropped their appeal case last month after their funds would have been short of the "total potential legal costs" faced if the SIPP provider lost its appeal.


What is the FSCS?

The FSCS is a statutory deposit insurance and investor compensation scheme. It can compensate clients if a financial firm is unable to. It has often been described as a “lifeboat” fund.

It is independent of the government and the financial industry, and was set up under the Financial Services and Markets Act 2000, becoming operational on 1 December 2001. They do not charge individual consumers for using our service.

Smooth Commercial Law work alongside the FSCS to get clients the compensation they deserve. The FSCS have protected more than 4.5m people and paid out £26bn in compensation.

The scheme pays a maximum of £85,000 on individual investment claims.

A spokesperson from the lifeboat scheme said of the current Berkeley Burke situation:

The FSCS is aware that IFAs recommended many Berkeley Burke Sipp Administration customers to transfer their existing pensions into a Berkeley Burke Sipp.

After the transfer, customers had their pension funds placed in high-risk, non-standard investments. Some of these have since become illiquid, which means they can’t currently be sold or traded.


How can Smooth Commercial Law help?

At Smooth Commercial Law, our team of experts have extensive experience in dealing with a whole manner of claims that arise from negligent and/or unsuitable financial advice. We are seeing more and more mis-sold SIPP claims, and have managed to secure compensation for many of our clients.

Should you have a claim, we can deal with your case and look to recover compensation for not just your loss of investment but also any adverse tax liabilities that you may now be facing as well.

You can contact our experienced team by calling 0800 046 9976 or by emailing sb@smooth-commercial-law.co.uk

The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.