Suffolk Life Master Sipp · CAS-37412-G7F9

CAS-37412-G7F9

Ombudsman’s Determination Applicant Mr Y

Scheme Suffolk Life Master SIPP (the SIPP)

Respondent Curtis Banks

Outcome

Complaint summary

Background information, including submissions from the parties

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Summary of Mr Y’s position

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“8.

• Its Investment Committee had decided in 2013 that, although not a regulatory requirement, it would require all investment fund managers to have PI cover before it could agree to its appointment from that time. This was made a requirement of its Global Agreement.

• Mr Y agreed to these Terms when opening the SIPP. Curtis Banks’ website also stated that the appointment of investment managers was subject to conditions.

• Mr Y was not discriminated against. Other accounts with C&C had been set up before 2013 when the Global Agreement was not yet in place requiring PI cover. No accounts had been established after that time, without the investment manager having PI cover.

• Curtis Banks could not agree to waive PI cover for C&C. Investments were purchased in Curtis Banks’ name for a client’s SIPP, so it could not proceed unless it was satisfied that the SIPP funds were protected.

4 CAS-37412-G7F9 • It was not until March 2019 that C&C was able to comply with the terms of the Global Agreement. Funds held out of the market prior to this, were at Mr Y’s discretion, as there were other options available.

• He could have chosen from many investment managers with which Curtis Banks had an established agreement and invested without delay. He also already had an investment account connected to his SIPP that he could have deposited funds with. This would have ensured that they were not held out of the market until C&C was able to acquire PI cover.

Adjudicator’s Opinion

Following the Adjudicator’s Opinion, there were further exchanges between Mr Y and my office. In summary Mr Y said:-

• He was disappointed that the Opinion did not directly address a number of points he had made, which he felt were central to his argument.

5 CAS-37412-G7F9 • In essence his complaint was founded on issues of treating customers fairly (TCF) and discrimination, rather than a simple assertion that it was, in principle, unreasonable for Curtis Banks to require investment managers to take out PI cover. The fact that it is not a regulatory requirement simply demonstrates that this measure is a matter of choice which Curtis Banks could waive for a short time if it so wished.

• He has never argued that Curtis Banks was not entitled to make a commercial decision to require its investment managers to maintain PI cover. His “fundamental point” was that, in applying this requirement specifically to him at the time in question while not at the same time applying the same requirement to all their other existing customers, Curtis Banks clearly treated him unfairly. It had prevented him from executing his investment choices when other mutual customers of the same investment manager, and perhaps other investment managers, were not so prevented from trading.

• It was unreasonable for Curtis Banks to discriminate against him in this way when time was of the essence for him. Curtis Banks admitted this discrimination in its letter of 12 July 2019.

• He had intended to appoint C&C, with which he had a longstanding relationship, rather than any individual. In the weeks preceding completion of the property sale, he had discussed this with Curtis Banks by telephone and had referred to the Curtis Banks website concerning choice of investment managers. Nothing was said to him personally, or flagged on the website, to suggest that his intention to appoint an existing investment manager might be in any way “problematical”.

• At the time he wanted to appoint C&C as his investment manager, Curtis Banks was already working with C&C as an investment manager for other Curtis Banks SIPP customers, hence an agreement was already in place between these parties, even if not in its latest form. C&C was certainly convinced that it had an existing agreement with Curtis Banks as indicated to him by email on 28 November 2018.

• He “strongly” refutes the suggestion that he could have chosen from a large number of investment managers with which Curtis Banks had already established a Global Agreement. He queried:-

- How would he have accessed a full list of these investment managers and how would he have known that the investment managers had PI cover?

- How would he or Curtis Banks have known which investment managers would have been willing to execute fixed income trades of the nature that he had in mind?

- Why didn’t Curtis Banks make this suggestion to him in November/December 2018, when it had become aware of his predicament?

6 CAS-37412-G7F9 • At the time of the Investment Committee’s decision in January 2019, his SIPP was, to the best of his knowledge and belief, subject to terms dated January 2017 as this was the last change of terms of which he had received notification. These were not the same Terms that applied when he first opened the SIPP. But he acknowledged that he was aware of the position in January 2017, although as a property investor he had little reason to review the investment managers provisions in detail.

• When responding to his complaint on 12 July 2019, Curtis Banks appended a different set of terms dated July 2019, and which amend Section 8 by adding a rider to clause 8.3 and inserting a new clause 8.4. Clearly these July 2019 conditions did not apply at the material time, and this later version of clause 8.4 should therefore have no bearing on the Adjudicator’s Opinion.

• Furthermore, the Adjudicator only quoted part of the full wording of clause 8.3, and one might infer from the next omitted sentence thereof that Curtis Banks contemplated the need for flexibility on occasions.

• In clause 8.3, Curtis Banks’ delegates responsibility for ensuring that the terms of business agreed by Curtis Banks with the appointed investment managers are acceptable to the customer. On this basis, one might think that Curtis Banks would be similarly prepared to accept his offer to take responsibility for a temporary waiver of the PI cover requirement.

• The decision of Curtis Banks’ Investment Committee, to require that all investment managers have PI cover, was made in 2013. In his view, Curtis Banks had “ample time” to address this issue with C&C long before he had elected to appoint C&C. He was therefore a victim of Curtis Banks’ tardiness, or perhaps its lack of care, given the perceived importance of the PI cover requirement.

• He queried why, after so many years of this relaxed approach to enforcing this requirement, his request for temporary flexibility hit such a brick wall. Perhaps because he had been identified by the investment committee to be in some way a high-risk customer for unsubstantiated reasons.

• Curtis Banks’ reasons for asserting that it did not discriminate against him or could not temporarily waive the PI cover requirement for C&C, do not stand up to reasonable examination and made little sense to him.

• By not agreeing to temporarily waive its PI cover requirement in his case, Curtis Banks treated him unfairly, as it had “clearly” waived this requirement for other customers.

• TCF is a fundamental principle of overarching financial conduct regulation and would be paramount if in conflict with firms’ contractual terms and conditions.

• He disagrees with the view that C&C being previously appointed without PI cover on other accounts in the SIPP was irrelevant. No explanation has been given as to 7 CAS-37412-G7F9 why this is irrelevant other than the quoted contractual terms, one clause of which did not apply at the time in question.

In response the Adjudicator said:-

• Mr Y had made Curtis Banks aware of his intention to appoint C&C as his investment manager in late November 2018. Following this, Curtis Banks emailed C&C to inform it of its requirements to set up an account, including the requirement for C&C to have PI cover.

• There were several emails between Curtis Banks and C&C between 28 November 2018 and March 2019, concerning Curtis Banks’ requirement for C&C to have PI cover. During this period, on 4 December 2018, Curtis Banks emailed CC and said:

“Having raised this with our Investment Committee they have advised that due to not currently having Professional Indemnity Insurance we would not be able to establish any further accounts with you as this is a requirement in order to sign into our global investment agreement.

I appreciate we do currently hold a number of accounts with you, therefore, it has been agreed this accounts [sic] can remain…”

• Curtis Banks had made C&C aware, within a reasonable time (less than a week), that it could not appoint it as Mr Y’s investment manager until it had PI cover. On the balance of probabilities, C&C would have made Mr Y aware of the contents of this email. So, Mr Y could have mitigated any losses that he believes he has incurred, by appointing an alternative investment manager, who had the required PI cover.

• The Adjudicator noted Mr Y’s comment that he would not have known which investment managers had PI cover, or if any of those investment managers would have been willing and able to execute the trades in accordance with his requirements. However, Mr Y could have requested this information from Curtis Banks. Curtis Banks did not have an obligation to provide Mr Y with this information unless he specifically asked for it. So, there was no maladministration by Curtis Banks in this regard, and Curtis Banks had not treated Mr Y unfairly.

• Curtis Banks did not discriminate against Mr Y, when it did not agree to waive the requirement for C&C to have PI cover, so that C&C could be appointed as Mr Y’s investment manager. In its letter to him dated 12 March 2019, Curtis Banks said:

“Regarding the three existing accounts we already had with [C&C] this has been agreed to honour those existing accounts as they were set up before our policy changed to introduce our Global Agreement. Our Global Agreements came into force in 2013 and we therefore haven’t established any more accounts since then…”

8 CAS-37412-G7F9 • Curtis Banks confirmed to Mr Y that the accounts held with C&C were in place prior to the implementation of the Global Agreement, that is why there was no requirement for C&C to have PI cover for those accounts.

• Curtis Banks had not established any new accounts with C&C, or any other investment managers since the implementation of its Global Agreement if the investment manager did not have PI cover. So, in the Adjudicator’s view, the Ombudsman would not deem that Mr Y was discriminated against in this regard.

• The Adjudicator appreciated that the requirement for investment managers to have PI cover is not regulatory. However, Curtis Banks’ requirement for investment managers to have PI cover is its commercial decision. Mr Y’s disappointment with Curtis Banks not agreeing to waive its PI cover requirement for C&C is not sufficient for the Ombudsman to deem Curtis Banks’ actions amounted to maladministration.

• Curtis Banks has a right to make commercial decisions for the effective running of its business. In the Adjudicator’s opinion, the Ombudsman would not direct it to amend or change its commercial decision.

• The Terms that were applicable when Mr Y requested C&C be appointed as his investment manager was the 2017 Terms. Clause 8.1 (c) of these Terms states:

“…we reserve the right not to direct the trustee to appoint any person chosen if they do not meet our requirements. These requirements include a requirement that the investment manager is based in the United Kingdom, has the necessary regulatory permissions, will report transactions to us in a timely manner and suitable format and will act on instructions given by us. If you are unsure whether your chosen investment manager is acceptable to us please contact us…”

• The 2017 Terms did not specifically say that investment managers were required to have PI cover. However, these Terms did not say that the requirements listed were the only requirements needed for an investment manager to be appointed. Curtis Banks acted in accordance with the 2017 Terms when it did not appoint C&C until all its requirements were met.

• It was unfortunate that, at the time Mr Y wanted to appoint C&C as his investment manager, C&C did not have PI cover. However, Curtis Banks had informed C&C, within a reasonable time, that it could not be appointed as Mr Y’s investment manager until it had PI cover.

• Ultimately, it was Mr Y’s decision not to appoint an alternative investment manager, after he was informed that C&C could not be appointed until it met Curtis Banks’ requirements. The Adjudicator considered that the Ombudsman would not hold Curtis Banks accountable for any losses Mr Y believes he incurred between 26 November 2018 and 12 March 2019.

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• He is disappointed that both the central arguments he had put forward in support of his complaint, and many of the more detailed points that he had made in response to commentary by the Adjudicator and Curtis Banks have not been addressed in any meaningful way.

• “Common sense dictates” that he must have been treated unfairly when he was prevented from making trades through his chosen investment manager at a time when other Curtis Banks’ clients, with the same investment manager, were not so prevented.

• “Clearly” this was a case of one rule for one, and one rule for the others, resulting in unfair discrimination. Moreover, it gives the lie to the suggestion that it was essential to apply the PI cover requirement for the protection of all of Curtis Banks’ clients.

• It has been argued that Curtis Banks’ contractual terms entitled them to make a ‘commercial decision’ to apply this PI cover requirement in his particular case. This flies in the face of Curtis Banks over-arching regulatory duty to treat its customers fairly. TCF should be paramount and the offending contractual clauses set aside in this instance. The question also arises as to whether there are provisions in the Terms which might in themselves be unfair.

• It has also been argued that he could have elected to use another investment manager which would have enabled him to execute his cornerstone investment without delay. His previous points regarding this aspect remain unanswered and does not appear to have been considered.

• The Adjudicator in her latest letter said that he could have requested information from Curtis Banks to enable him to identify investments managers willing and able to execute the trades he was minded to make. This statement misjudges his state of knowledge concerning Curtis Banks’ behind the scenes investment managers systems, the panel constituents, their potential appetites, and whether they were party to the Global Agreement.

• It is entirely unreasonable to expect him to have thought of this without being prompted by Curtis Banks. “There was a significant asymmetry in the information that was available to [him]. If this alternative had truly occurred to Curtis Banks at the time that he was asking for help in resolving his problem, why didn’t Curtis Banks draw this to his attention and avoid a complaint?”

• Moreover, this argument assumes that a suitable investment manager could have been identified from ‘the large number available’ without undue delay. As far as he could see, no one has so far demonstrated that this outcome would in fact have been achievable, “so this line of defence by Curtis Banks is surely moot”.

10 CAS-37412-G7F9 • One of the key factors cited by the Adjudicator in coming to her initial view was the effect of Clause 8.4. Curtis Banks has also relied on this in their own arguments.

• He has demonstrated that this wording does not appear in the 2017 Terms. Regrettably, this flaw in the findings does not appear to have been recognised or considered in subsequent reviews.

• With regard to Clause 8.3, he suggests that it is implicit that such terms should be reasonable.

• Curtis Banks has stated that it is essential for its clients’ investment managers to have PI cover in order to mitigate potential losses for those clients. If this statement is taken at face value, it seems to him that the failure of Curtis Banks to proactively roll out its Global Agreement across all its investment managers, within a reasonable period after the Global Agreement’s introduction over 10 years ago, raises some interesting regulatory questions about Curtis Banks risk management practices and governance.

After considering Mr Y’s further points, I do not agree that this complaint should be upheld. I explain my reasons for my decision below.

Ombudsman’s decision

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I do not uphold Mr Y’s complaint.

Anthony Arter

Pensions Ombudsman 21 July 2021

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