Liberty Sipp faces legal challenge over risky investments

Liberty Sipp faces legal challenge over risky investments

Solicitors firm Anthony Philip James & Co (APJ) is bringing more than 30 cases against self-invested personal pension (Sipp) provider Liberty Sipp in relation to unregulated esoteric investments.

The firm took on the cases from claims management company First Target Recoveries, which, it said, had had 872 clients referred to it by the insolvency practitioner, but had reached the end of its legal options.

APJ has notified the courts of 30 cases, which it will seek to consolidate, but it claims it has 700 more investors who allege they have suffered significant losses as a result of unregulated pension investments through Liberty Sipp.

The 30 claims relate to investments in Ethical Forestry and other schemes made between 2011 and 2013.

Ethical Forestry was introduced to Liberty by an unregulated introducer and is currently the subject of a criminal investigation by the Serious Fraud Office.

Liberty Sipp denies any wrongdoing. John Fox, managing director of Liberty Sipp, said the firm could not be held liable for 'advice', which it did not offer.

Glyn Taylor, solicitor at APJ, said the aim of the legal action is to prove Liberty Sipp "acted unlawfully" when it received introductions from an unregulated introducer to put Liberty clients in high risk investments.

The law firm alleges Liberty Sipp breached its obligation to act honestly, fairly and professionally in accordance with the best interest of their customers as set out by the Financial Conduct Authority (FCA) Conduct of Business rules.

Liberty Sipp stopped allowing non-standard assets in 2013, and now 96 per cent of its assets under management are classed as standard.

The firm also reported rapidly increasing client numbers following a surge in adviser recommendations last year.

Mr Fox said: “Liberty Sipp has never offered financial advice on these execution-only investments, as Sipp providers are never regulated to do this, and at no time have regulators required Sipp providers to gauge the suitability of these kinds of investments for specific individuals.

"We look forward to finally being able to lay those misapprehensions to rest.”

There are a number of separate cases currently going through the legal system, which deal with the issue of Sipp provider responsibility.

The Financial Conduct Authority (FCA) spoke at a case against Carey Pensions in March and is due to present at the Berkeley Burke judicial review in the autumn.

It is arguing acquiring the assets in a Sipp forms part of operating the Sipp.

As such, under section 22 of the Financial Services and Markets Act 2000 establishing and operating a Sipp as well as buying and selling securities are regulated activities, therefore Principles 2 and 6 apply.

This means Sipp operators must conduct their business with “skill, care and diligence” (Principle 2) and “pay due regard to the interests of its customers and treat them fairly” (Principle 6).

But the courts are still to decide whether execution-only agreements are binding and effectively relief providers of these regulatory duties.

MPs meanwhile, have written to the FCA for answers on what repercussions firms will face if they flout the watchdog's rules.