In its judgment published today, the court found the activities of unregulated firms Avacade Limited and Alexandra Associates were unlawful as they had advised on investments, made unapproved financial promotions and made false or misleading statements.
The case was brought by the regulator in 2017 over alleged pensions mis-selling.
It concerned the activities of the two unregulated firms as well as their directors, Craig Lummis, Lee Lummis and Raymond Fox.
The regulator alleged Avacade Limited and Alexandra Associates had provided a pension report service that had crossed into pensions advice.
The firms, which traded as Avacade Investment Options and Alexandra Associates before entering liquidation in November 2015, then promoted self-invested personal pensions and investments in alternative assets such as tree plantations and Brazilian property developments, according to the FCA.
The regulator alleged the firms made misleading statements to consumers, and carried out regulated activities in the UK without authorisation.
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.”
According to the regulator more than 2,000 clients transferred in the region of £91.8m from their pensions into Sipps.
Approximately £68m of that amount was invested in products promoted by Avacade and approximately £905,000 was invested into a product promoted by Alexandra Associates, a fixed rate bond relating to a Brazilian property development.
From these investments the unregulated firms earned commissions in the region of £10.8m.
Many of the underlying investments have since failed or are in liquidation.
The court concluded the firm’s activities were unlawful as they had “engaged in the regulated activities of arranging and advising on investments”.
It also found they had made unapproved financial promotions through their websites, promotional material and in telephone calls to consumers, as well as making false or misleading statements.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "The actions of those involved put the pension savings of thousands of people at risk. We will now seek restitution for them.
"Unregulated introducers, like Avacade, often try to skirt regulation by making false claims about the kind of service they provide.
“We urge consumers to avoid unregulated firms offering any kind of free pension review and only deal with firms which appear on the FCA register and who are permitted to provide pension advice."
The FCA is now seeking orders from the High Court banning Alexandra Associates, the Lummis's and Mr Fox from engaging in unauthorised activities in the UK.
The FCA will also be asking the court to calculate the amount owed by Alexandra Associates and the individuals “by way of restitution for their roles in the unlawful activity”.
The regulator has also asked any clients of the firms to come forward and get in contact with the regulator.
Failed attempt to postpone
Earlier this year Craig Lummis sought an order to adjourn the trial on the basis that he was medically unfit to stand trial.
Craig Lummis claimed that he was suffering from severe adjustment disorder and his ill-health was preventing him from properly participating in the proceedings.
He argued that as he was not in a position to attend trial on the basis of his ill health and advice from his doctors, non-participation will mean that he is not able to comment on the proceedings and will not be able to cross-examine the FCA’s own witnesses.
The FCA argued that his application was made “extremely late” and an adjournment would waste costs, court time and resources.
However Judge Johnson found that as Craig Lummis was of full mental capacity, as stated by one of his doctors, he was capable at least to some degree of engaging with the issues in the case.
He therefore dismissed the case for an adjournment of the trial.
amy.austin@ft.com
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