FSA to review Capital Adequacy

Posted: 14/11/2011 13:29:21 by Global Administrator | with 0 comments

It was disappointing to note that following FSA visits to several SIPP Providers it was found that not all are conducting their due diligence of assets as well as perhaps they might. This has prompted the FSA to suggest that capital adequacy would need to be increased based on the type of assets permitted by the Provider. Milton Cartwright suggested at the Henry Stewart conference in November that this could be as much as 18 months of administrative expenditure, as it requires some considerable time to unwind some of these complex investments.
 
However, a period such as this is somewhat unrealistic. If a SIPP provider has an issue with perhaps 5% of its SIPP book it doesn’t mean that the income from the remaining 95% stops immediately. Even if the book has to be run down over a period of time, requiring such a period appears excessive and would serve only to reduce the number of SIPP Providers by a significant proportion.
 
It would be more realistic to base required capital adequacy on a provider specific test, detailing what proportion of the SIPP book was in the potentially more esoteric investments and also the competency of the firms due diligence. This would be more equitable than a blanket view across the industry.