The Court of Appeal has sided with claimant Russell Adams and found against provider Carey Pensions, overturning a previous High Court ruling in a landmark decision.
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".
Carey originally won the case with claims against the Sipp provider being dismissed on all grounds in May 2020.
But in a judgment published today (April 1), the Court of Appeal unanimously overturned that ruling and found Adams was advised, in contravention of the Financial Services and Markets Act 2000, by CLP Brokers, an unregulated introducer based in Spain.
The court said at no time was CLP authorised by the Financial Conduct Authority to give investment advice, or to make arrangements relating to investments.
The court declared that, because the Sipp was entered into as a consequence of CLP’s actions, the Sipp agreement is unenforceable against Adams, and he is therefore entitled to ‘unwind’ it and recover the money he paid into it, as well as compensation to reflect the losses he has suffered as a consequence.
Tim Hampson, a partner at Wixted & Co Solicitors, who represented Adams throughout the proceedings said: “We are delighted with the Court of Appeal’s well-reasoned and common-sense decision. It has been a very long road for Mr Adams, but we hope that he will now finally be able to move on with his life and enjoy his retirement.
“In addition, the judgment will assist many other investors who have lost funds because of investment advice given to them by unregulated parties.
“We agree with the Court of Appeal’s fair warning to regulated firms that, if they choose to deal with an unregulated entity, who they cannot necessarily control, then the risk is squarely on them if that entity crosses the perimeter and contravenes the general prohibition.”
Christine Hallett, managing director of Carey, which has since rebranded as Options, said: “We are disappointed to have received this judgment in relation to section 27, and even more so that the various factors in Carey’s favour – the rigorous framework that Carey had put in place, and which was specifically highlighted by the judge at first instance, that Carey was not aware that the unregulated introducer was acting in breach of the general prohibition and terminated its relationship when it did become aware, and Mr Adams’ contribution to his own loss - were not sufficient for the Court of Appeal to exercise its discretion under section 28.
“Whilst the findings of section 27 will always relate to fact specific scenarios, in the context of the Sipp provider environment generally, as well as the wider UK financial services industry, any clarity and additional guidance is welcome and needed.
“Invariably all UK regulated businesses will need to consider their procedures and policies, and the potential implications of dealing with any unregulated third-party that could be deemed to be caught in what is under the judgment, the very broad and encompassing acts of “making arrangements” and “advising”.
“Importantly, and as expected, the Court of Appeal upheld the judgment of first instance that Carey had met its obligations under the Conduct of Business principles."
Hallett did not comment on whether Carey would seek to take its case to the Supreme Court.
amy.austin@ft.com
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