Ombudsman rejects claim adviser should have prevented scam

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Ombudsman rejects claim adviser should have prevented scam

In the determination, the defendant, cited as Mr D, complained that Pension Practitioner.com had not prevented the loss of his pension fund assets.

This came after he set up a small, self-administered scheme (Ssas) on the instigation of an unauthorised financial adviser, and subsequently invested in a worthless carbon credits scheme.

The initial investigation by the adjudicator found that Pension Practitioner had no case to answer, but Mr D did not accept the adjudicator’s opinion and the complaint was passed to the ombudsman to consider.

However, ombudsman Anthony Arter said: "Although I have every sympathy for the position Mr D finds himself in I do not find Pension Practitioner can be held liable for a fraudulent act committed by another party."

Therefore, he did not uphold Mr D's complaint.

The basis of the complaint followed the loss of Mr D's pension money after an unregulated firm, Anthony James Hall (AJH), introduced Mr D to a company called SJL Risk, through which Mr D invested in carbon credits.

The problem started, Mr D claimed, when AJH contacted Pension Practitioner stating that Mr D wanted to set up a Ssas back in 2011.

AJH told Pension Practitioner Mr D was interested in making a loan to his existing company by using money from a policy he had with Skandia which he wished to transfer to the new Ssas.

I do not find the fact Pension Practitioner failed to inform Mr D that AJH was an unregulated adviser suspicious. 

Pension Practitioner sent AJH the documents to set up a Ssas.

Included in the documents was a letter to Mr D setting out how the Ssas would operate and a statement that Pension Practitioner was not a signatory to any investments or bank accounts and did not recommend any investment products or give investment advice.

In April 2012, Pension Practitioner received the completed forms to establish the Ssas. 

Pension Practitioner said it also discussed the transfer from Skandia with Mr D and completed the necessary transfer forms.

Skandia subsequently paid a transfer of £228,367 into a new Investec bank account. 

In June 2012, Pension Practitioner wrote to Mr D’s accountant requesting information regarding the financial strength of the company in relation to the pension scheme loan.

In July 2012, AJH confirmed with Pension Practitioner the employer was not seeking a pension scheme loan at that time.

Mr D was subsequently introduced to SJL Risk by AJH, and proceeded to make investments in carbon credits which have subsequently proved to be worthless.

In 2014 SJL Risk entered voluntary liquidation.

Mr D had claimed he did not sign the application forms to invest in carbon credits and claimed his signature was forged by AJH.

According to the Ombudsman documents, Mr D told the ombudsman that Pension Practitioner should have told him it was advisable to appoint a second trustee, such as Pension Practitioner itself.

The victim argued that, as he is a layman and he could not be expected to understand the possible pitfalls that could befall him, to allow the pension scheme to operate on the basis of one signature only is a serious dereliction of responsibility.

However, Pension Practitioner said it was not necessary to appoint a third party trustee to a Ssas, and this does not give any safeguards as to the suitability of an investment.

Moreover, if Mr D has been the subject of a fraud by AJH, this should be reported to the police.

Pension Practitioner was not a signatory to the account and was not aware of the investment in carbon credits until after the event.

Pension Practitioner also made it clear, in the Ssas literature, and the terms of business, that it does not provide investment advice and that Mr D was free to choose his investments subject to certain limitations.

If Pension Practitioner had been told that the purpose of setting up the Ssas was to invest in carbon credits and not for making a loan to the employer, then it would have requested Mr D to obtain regulated financial advice.

The adjudicator found no further action was required by Pension Practitioner. 

The adjudicator's note said: "It appears that Mr D has been the victim of a pension scam, which over recent years has become much more prevalent within the UK pensions industry.

"In essence it usually involves the transfer away from a genuine pension scheme to another arrangement with investment promising high returns which often prove to be worthless.

"Mr D’s funds were diverted by AJH into carbon credits, via SJL Risk which is the subject of a police investigation, but it is unlikely that Mr D will recover his investment.

"Mr D, not unnaturally, is seeking to recover those funds by whatever means possible and is seeking to place a moral responsibility on Pension Practitioner."

However, the original adjudicator did not consider Pension Practitioner could be held responsible for the loss of Mr D's funds which, it is alleged, were fraudulently diverted into carbon credits.

Moreover, Pension Practitioner had made it clear, in the Ssas literature, that it provided only administration and tax compliance services and not investment services.

The adjudicator also rejected Mr D's claim that Pension Practitioner should have informed him that AJH was unregulated, and that the carbon credit investment had been made fraudulently.

However, the adjudicator said: "I do not find the fact Pension Practitioner failed to inform Mr D that AJH was an unregulated adviser suspicious. There were no indications that AJH was acting other than on behalf of Mr D. It was for Mr D to carry out his own due diligence on his adviser AJH.

"Moreover, Mr D has said the investment in carbon credits was made fraudulently by AJH, and Pension Practitioner was not aware of the investment until after the investment had been made."

simoney.kyriakou@ft.com