The recent court judgement in favour of Carey Pensions after a two-year legal battle could have wide-ranging ramifications for the Sipp sector and clients in a similar position to the man who pursued the court case.
But lawyer Glyn Taylor, from APJ solicitors, argues that despite the ruling going in Carey Pensions’ favour, it does not contradict previous decisions by the Financial Ombudsman Service (FOS); such as those involving Liberty Sipp or Berkeley Burke.
Legal battle
Carey was sued by a former client, Mr Adams, who transferred his pension fund into a self-invested personal pension administered by the firm after he was approached by an unregulated introducer.
In 2012, he instructed his Sipp to buy several rental units from a company called Store First, which the retirement solutions provider carried out on an execution-basis – as it did not offer advisory services.
But in 2017, Store First and three associated companies wound up in the UK high court and Adams brought a claim against Carey seeking damages.
The 18 May 2020 ruling, however, went wholly in favour of the Sipp firm because judge Dight determined that it did not act unfairly and was not responsible for any advice or for the introducer’s actions.
It has been reported that Adams intends to appeal the decision and International Adviser has reached out to his lawyers, but did not receive a comment in time for publication.
Impact on the sector
While a precedence has now been set – pending appeal – APJ’s Taylor believes that the fallout will not be as widespread as it may seem.
“FOS decisions are determined on the complaint against the Sipp operator by reference to the facts of the complaint and the opinion of the ombudsman as to what is fair and reasonable in all the circumstances of the complaint.
“The Carey judgement considered Conduct of Business (COBS) 2.1.R; that a Sipp operator has a duty to treat a customer fairly, act professionally and have due regard to the best interests of a client.
“Judge Dight decided on the evidence provided that any breach of this could not be said to have caused Mr Adams loss, which was very fact specific.”
What the law says
He continued: “The significant part of the judgement, for most of APJ clients, concerns the references in the judgement relating to section 27 of FSMA 2000.
“The court accepted that the establishment of the Sipp by Carey was a regulated activity. Mr Adams then argued that [the introducer] ‘advised’ on and ‘arranged’ for him the Sipp and/or the investment in Store First, which was a breach of the general prohibition.”
Taylor added, however, that Adams strongly argued he would’ve gone through with the investment regardless of the advice he would’ve been given.
He said: “The premise of s.27 FSMA 2000 is such that where an authorised person, in the course of a regulated activity, makes an agreement with another person, as a consequence of something said or done by a third party also in the course of a regulated activity, but in breach of the general prohibition, then that agreement may be unwound.”
But the judge found that there was no basis for Adams’ claims as there was no advising on or arranging of the investments involved.
Compare and contrast
What differs from the Liberty Sipp and Guiness Mahon cases, Taylor said, is the activities of the introducer – which in these instances was a firm called Avacade.
“There is strong evidence that Avacade, recently prosecuted by the FCA, recommended Liberty Sipp whilst carrying out regulated activities as an unregulated firm.
“There is also evidence that Liberty Sipp, once in receipt of the pension monies, wrote to the clients confirming they will contact Avacade to confirm the investment choices within the Sipp rather than asking the investor directly.
“This clear evidence demonstrated that Avacade brought about the investment and a had a positive or effective cause to the investment,” he added.
But that is not the case for Adams’ situation, since he was the one who wanted the investment to be made in the first place.
“I am beyond confident that FOS will continue to find against Sipp operators where there has been a failure to carry out appropriate due diligence on an investment, or where a Sipp operator has accepted volume business from referrers involved in the arrangement/recommendation of the Sipp and promoted the high–risk investment that has caused the loss to unsophisticated, vulnerable consumers,” Taylor said.
