The High Court has sided with Carey Pensions in a landmark case, with claims against the Sipp provider being dismissed on all grounds.
The outcome, which will have ramifications for the rest of the industry, centres on the question of provider responsibility when accepting investments into a Sipp.
The case saw driver Russell Adams allege Carey Pensions mis-sold him a Sipp. He and his lawyers accused the Sipp provider of using a Spain-based unregulated introducer to facilitate investments in Store First unit pods which were unsuitable and are now deemed "worthless".
But in a judgment published today (May 18), Russell Adams’ claim against Carey Pensions was dismissed on all grounds, bringing with it clarity on the duties and obligations of Sipp providers, and "important findings for all financial institutions as to the parameters of ‘execution-only’ instructions".
The Sipp industry had been nervously awaiting the outcome of the case for more than two years, the original trial having concluded in March 2018.
Mr Adams had signed an execution-only contract, but his lawyers argued regulatory principles around treating customers fairly meant he should have not been allowed to open the Sipp without advice.
At the hearing in March 2018, Carey's legal team alleged Mr Adams knew the risks he was taking in investing his £50,000 pension into storage pods from Store First.
The High Court case saw Carey again insist it had warned Mr Adams about the specific risks to his pension. It claimed he had nevertheless instructed the Sipp firm to carry out the pension transfer.
The provider argued the loss was caused by the high-risk investment, not the pension transfer or any collusion between Carey and CLP.
The High Court has today sided with Carey and thrown out all of Mr Adams' claims.
Christine Hallett, managing director of Carey, said: "We acknowledge this isn’t the outcome the client was looking for, we do have sympathy for his situation and the fact that as a result of his decisions the investments he chose and instructed us to invest in have lost value.
"That said, we are pleased that the judgment has now been delivered, and that the judge has found in our favour on all counts.
“It has been a long time coming and whilst we were confident of our position, the lengthy, comprehensive and detailed judgment recognises within it our approach to implementing strong contractual agreements and documentation, together with robust systems, controls and processes within the business.
"It was also clear that as a Sipp provider we are expected to carry out execution-only business based on decisions made by our clients."
The Sipp industry has faced significant volumes of complaints and claims for several years, arising from similar facts to those in the Adams case and many of these complaints have been upheld by the Financial Ombudsman Service.
But today's judgment will have far reaching consequences for the rest of the industry and clarifies what is expected from providers.
In particular, that the scope of the FCA's conduct of business sourcebook must be considered through the lens of the individual contractual arrangements with customers.
Ms Hallett added: "It is a judgment that has been long awaited by the Sipp industry and consumers alike, and gives clarity to what is expected of a Sipp provider under English law and the FCA conduct of business principles when acting upon the instructions of a client.
"In addition, it has given a much better understanding of the legal relationship between an introducer and the service provider which will provide valuable guidance for both consumers and industry professionals."
A wider issue
This case touched on similar issues to the judicial review case brought by Berkeley Burke, which has since been thrown out.
Berkeley Burke Sipp dropped its appeal against a Financial Ombudsman Service decision from 2014 which ordered it to compensate a client after it failed to carry out adviser-style due diligence on his investment, in October.
Many claims against Sipp providers on the due diligence they conducted on underlying investments are in relation to business that took place before July 2014, when the FCA made it clear Sipp operators should be doing due diligence to a high degree on any asset they accept within their book.
Carey Pensions was acquired by STM Group in October 2018 and now goes by the name Options Pensions following a rebrand earlier this year.
amy.austin@ft.com
What do you think about the issues raised by this story? Email us on fa.letters@ft.com to let us know.
