The Financial Services Authority’s (FSA’s) manager of pensions and investment policy has described the regulation of Self Invested Personal Pensions (SIPPs) as a ‘work in progress.’

When asked by Association of Member Directed Pension Schemes (AMPS) conference delegates whether increased regulatory scrutiny had been a success, Milton Cartwright admitted it was not the finished article.

He said the FSA is working towards a further consultation on capital adequacy later this year. He signalled a likely move to a model where firms would be assessed on the number of esoteric investments held.

He also added there was a “strong correlation” between the number of esoteric assets held and the ability of a firm to wind down in a timely fashion. Currently, providers authorised to hold client money are expected to hold the equivalent of 13 weeks expenditure as a buffer to protect investors in the event of failure.

Those who do not hold client money are required to have six weeks’ worth of reserves.

Cartwright said the FSA would take its time in implementing any changes to capital adequacy limits.

When asked about the regulator’s stance towards UCIS and esoteric investments, he said SIPP providers and advisers should consider further issues at stake when recommending these products.

He said: “Leaving behind regulatory news, this is a reputational issue for the SIPP industry. These are restricted in promotion for a reason [they are] high risk and governance requirements on UCIS is nowhere near that found under the UCIS directive. Failure in this space [on esoteric investments] held by SIPP operators is not good for the reputation of the industry.”