The Financial Conduct Authority (FCA) has launched legal proceedings against two unregulated introducers and their managers for wrongly carrying out regulated business.
The regulator alleged the firms Avacade Limited and Alexandra Associates provided a pension report service which was marketed as summarising a consumer’s pension information and retirement objective, to help people make decisions on their retirement savings.
The firms, which traded as Avacade Investment Options and Alexandra Associates, before entering liquidation then promoted self-invested personal pensions (Sipps) and investments in alternative investments such as tree plantations, the FCA said.
The FCA alleged the firms made misleading statements to consumers, and carried out regulated activities in the UK without authorisation.
They also communicated financial promotions without the required authorisation, the regulator said.
The FCA further alleged that “Craig Lummis, Lee Lummis and Raymond Fox were each knowingly concerned in Avacade’s breaches and Craig Lummis and Lee Lummis were each knowingly concerned in Alexandra Associate’s breaches.”
The FCA is seeking restitution orders in favour of consumers who were affected by these breaches as well as injunctions to prevent further breaches.
The court proceedings are at an early stage and no date for trial has been set, the regulator added.
The news comes as John Moret, widely called the 'Father of Sipps' warned thousands of claims about risky investments in Sipps were still pending, leaving both advisers and providers exposed to costly claims.
He said there could be 10,000 Sipp related claims in the pipeline - but as many as 50,000 investors with potential grounds for complaint.
Claims related to high risk investments in Sipps have been rocketing in recent years, with compensation paid to investors via the Financial Services Compensation Scheme up by 35 per cent to £105m between 2016 and 2017.
Former IFA turned consultant Harry Katz, of HA7Consulting, said the introducer firm went wrong by steering clients towards specific products and specific Sipp providers.
He said: "It is one thing to guide a client by saying that perhaps they may wish to consider a Sipp as they may take advantage of a wider range of investment vehicles and then perhaps even provide a list of Sipp providers with the caveat that the client should ensure their own due diligence, by telling them what to look out for.
"It is quite another to suggest an investment or a specific provider."
He also said an introducer or provider of generic guidance should never receive ‘kick backs’ from anyone, but should instead invoice the client directly for any guidance undertaken.
"This fee should be disclosed in advance before the client engages at all," he added.
carmen.reichman@ft.com
