Tim Middleton discusses the need to properly regulate professional trustees.
In July 2011, Graham Pitcher was sentenced to eight years in prison for his part in the GP Noble scandal. GP Noble, a Nottingham-based firm of professional trustees, was found to have been involved in defrauding £52 million from pension schemes on which its directors had served as trustees.
At a time when there was a growing focus on the importance of professional trustees in ensuring that adequate standards of governance were met, the scandal damaged public confidence in the independent trustee sector.
It raised a number of searching questions about the standards expected of professional trustees and also of their regulation. It has taken six years for the Pensions Regulator to grasp this particular nettle; fortunately it has done so in a way that should produce a lasting resolution.
One of the immediate consequences of the GP Noble scandal was that PMI's Independent Pension Trustee Group (IPTG) decided to establish itself as a formal professional body.
The new Association of Professional Pension Trustees (APPT) sought to establish recognised standards of conduct from its members in order to give the market confidence when appointing a professional trustee.
However, there remains no formal barriers to entry for professional trustees: to practise as a professional trustee requires an individual to do more than describe him or herself as such. Neither is there any form of ongoing regulation for professional trustees.
The Regulator finally addressed these anomalies with its recent consultation on how a professional trustee should be described. This raised a particular problem: just what constitutes a professional trustee? Both the PMI and APPT ran member surveys to form the basis of their respective responses.
Comments from members were not entirely conclusive; one APPT member noting that it was 'a case of you know one when you see one.' Although there was clear agreement about a professional being someone who 'holds himself out' as a trustee, there was less agreement as to what 'holding out' actually means.
Perhaps the best solution would be to follow the FCA's example and to instigate a regulatory regime comparable to the Statement of Professional Standing (SPS) requirements applicable to Financial Advisers since 2012.
Anyone who describes him or herself as a professional trustee would need to hold a relevant qualification and be under the supervision of a suitable professional body. This would, in turn, require them to conform to a Code of Conduct and to complete regular CPD.
The SPS system is tried and tested; its introduction for professional trustees would be both welcome and timely. With adequate governance standards becoming increasingly dependent on a growing number of professional trustees, an effective regulatory structure is absolutely essential.
Written by Tim Middleton, Technical Director, Pensions Management Institute.
