A client should have never been allowed to invest in a self-invested personal pension under certain regulatory and statutory rules, the High Court has heard today (22 March).
In a case brought against Carey Pensions by a client, being heard in court this week, it was argued Carey was wrong to allow him to invest in a Sipp, let alone in the unregulated investments underneath it.
The court heard the transfer of the client's pension was what caused the losses and Carey had the opportunity to stop this at any point.
The case was brought by Russell Adams, a lorry driver who invested £50,000 in Store First storage pods through a Carey Sipp after being referred by unregulated introducer CLP.
The claimant’s lawyers argued Financial Conduct Authority regulation as well as statutory rules were designed to protect consumers and would not allow regulated entity Carey to rid itself of its responsibility towards its client by arguing it was an execution-only transaction.
“Mr Adams should not have been allowed to invest into a Sipp if it means he does it without advice,” the barrister argued.
“Had he received independent financial advice which was competent it is unlikely he would have gone into a Sipp.”
He said rules set by parliament are intended to protect people from dealing with unscrupulous entities and from making foolish decisions.
Mr Adam's barrister said it is "a matter of causation that CLP did bring about the transaction...[it’s not the case] the transaction was inevitable and could not be reversed.
“Carey could have refused to do business with Mr Adams.”
Mr Adams was not even allowed to access his personal pension at that stage as he was below retirement age, he said.
However, there was disagreement in court over whether particular sections of the Financial Services and Markets Act and FCA rules applied to the setting up of a Sipp or the underlying investment.
The FCA is due to lay out its interpretation of the regulation in court later today.
The case has brought by Mr Adams, represented by law firm Wixted & Co, who alleged Carey was working with unregulated introducers to facilitate investments in Store First storage pods, which were unsuitable and are now deemed "worthless".
The claimant had accused Carey of failing in three ways: breaching Section 27 of the Financial Service and Markets Act 2000 by establishing a Sipp after an unregulated third-party firm advised on the transfer for the sole purpose of investing in the storage pods; breaching the FCA COBS rules that dictate a firm must act in the client’s best interest; and operating a joint enterprise with an unregulated introducer.
The claimant had invested his pension in the illiquid commercial property and his case will be used as a test case for about 90 more clients with liabilities of £3m, according to his lawyers.
Carey is accused of arranging such Sipps for as many as 580 members effectively within a six-month period in 2011/12 - all from the same introducer based in Spain.