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STM expects £3.6m hit from Carey compensation

But firm says acquisition pipeline is ‘active’ and will be ‘pillar for future growth’

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Cross-border financial services provider STM Group has set aside £3.6m ($5m, €4.1m) for potential claims following the outcome of the Adams v Carey Pensions case.

In its annual report for the year ending 31 December 2020, the firm said there could be a group of claims featuring similar characteristics to the one Adams brought before the UK courts.

STM estimates that the value of these claims will be around £3.6m, which will be fully covered by its professional indemnity insurance (PII).

But, the Adams v Carey case is not over yet, as the company sought permission to appeal to the UK supreme court in April 2021.

PI insurance

STM said in the annual report: “The group recognises that the UK Sipp industry is becoming more litigious over non-performing assets. Whilst the group does not provide financial or investment advice to its customers, and therefore believes it is not responsible for the performance of the investments, the group occasionally receives complaints in respect to these matters as well as others relating to general services provided.

“Each complaint is dealt with on its merits and remains a contingent liability until an outflow of economic benefits is probable and the quantum can be reliably estimated. Following the court of appeal judgment on 1 April 2021, the group has considered the potential impact this might have on the outcome of other claims made by Sipp members in respect of non-performing assets.

“Whilst the final outcome of Adams’ case is not yet known, consideration has to be given as to whether such provisions can reliably be estimated as to the potential financial obligation which could arise in the future.

“Furthermore, it is also recognised that the ruling made in Adams’ case was fact specific and included the exercise of discretion on the part of the court of appeal, and which was exercised in the context of those facts. The court of appeal has also not determined the appropriate relief payable to Adams.

“It is therefore difficult to assess the exact obligation that could arise on other claims based on this one case. An estimate has been arrived at by considering a cohort of claims which may be deemed to have similar characteristics to Adams’ claim. The value of this estimate, which has been reflected within trade and other payables, is £3.6m. This is covered by professional indemnity insurance and thus has also been reflected within trade and other receivables.”

M&A

But STM is also looking beyond the Carey legal case as the firm said it will be looking at acquisitions as a channel for future growth.

Alan Kentish, chief executive of STM Group, said: “Whilst the year has had challenges, we have achieved a great deal in progressing our three-year transformation and growth strategy. We see 2021 being a year where a number of strategic initiatives come to fruition that will build on efficiencies within the business.

“There is an energy and focus for the remainder of 2021 in building some key partnerships that will help drive new business volumes. Additionally, our acquisition pipeline is active and expected to be a pillar of our future growth.

“The recent judgment in the Carey v Adams case will have implications across the whole of the financial services industry who have dealings on an execution-only basis. This was a historical claim and the Options management team will continue to drive the business forward as they have done since being part of the STM team.”

The financial services provider recently sold its Gibraltar and Jersey trust businesses to focus on its pensions and life assurance operations.

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