The appeal against the outcome of Financial Conduct Authority v Avacade and others started on Wednesday, with the hearing spanning two days.
Introducer firms Avacade (in liquidation) and Alexandra Associates are contesting a high court ruling which has ordered them to refund nearly £11m ($15m, €13m) to investors who suffered losses in their self-invested personal pension schemes (Sipps).
The two argued that, as unregulated introducers, they had no responsibility and bear no liability in the case, and that it was the IFAs and Sipp providers who should have been legally challenged after the UK lifeboat scheme paid out £40m in compensation to their clients.
The panel of judges, made up of master of the rolls sir Geoffrey Vos, lord justice Peter Jackson and lord justice Andrew Popplewell, strongly questioned Avacade and Alexandra Associate’s assertion that the original high court ruling was in error.
Clarifications
Omid Khub of Zachary Khub Solicitiors, for Alexandra Associates, Craig Lummis and Lee Lummis, said: “We hope the court of appeal will clarify the hard-fought regulatory issues in this case which arise out of the application of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO).
“This saga relates to the relationship between unregulated introducers and FCA-regulated IFAs and pension providers.
“It has always been the case that our clients, as introducers, ought not to have been singled out and be held solely responsible for the losses alleged to have been suffered by investors, and that the FCA ought to have also brought legal action against the regulated Sipp companies and IFAs who placed the investor in those investments.
“The FCA has never given a satisfactory explanation for its unfair refusal to include those companies involved, in these court proceedings, especially having regards for the fact that they played a significant part in placing the investors into those investments, now complained of.
“Our clients have always maintained that they introduced the UK consumer to FCA-regulated IFAs and FCA-regulated Sipp providers to advise the UK consumer independently and to apply their own discretion to any investment decision.”
The Adams case
Khub continued: “The legal battle between the FCA and our clients, and the related dispute in Adams v Options Sipp UK (formerly Carey Pensions UK), have far-reaching implications for the regulated firms and unregulated introducers in the financial industry, across all types of introduced transactions caught by these rules.
“The court of appeal recently overturned the earlier decision of the high court in Adams, which impacts the high profile judgment in our clients’ case.
“Specifically, the court of appeal’s ruling in Adams provides a different interpretation of regulated transactions to that of the high court judgment in Avacade. This ruling, unless overturned by the supreme court, provides unquestionable support for our legal arguments, and accordingly, we have sought additional grounds for appeal, in addition to those which lady justice Asplin granted to our client in December 2020.
“In essence, on any view, the analysis of Adams makes it clear that it is not a regulated activity under the RAO to buy a tree in a Sipp. This is why we say that the legal authorities set in these two cases has a far-reaching implication for the financial industry, ie those who introduce consumers to the IFAs, Sipp providers and the consumers alike.
“We anticipate further clarification in this area of law from this heavy weight panel of judges, specifically for the protection of the consumer and financial firms alike.”
The hearing continues on Thursday.
