In five separate cases a Fos adjudicator sided with claimants who invested in Ethical Forestry, a scheme offering returns of up to 15 per cent from tree plantations in Costa Rica.
The scheme is currently investigated by the Serious Fraud Office and according to Companies House the company Ethical Forestry Ltd is in liquidation.
The Fos said Sipp provider Guinness Mahon had failed in its due diligence of the introducer involved in the sale and should have refused to take the business.
It told the Sipp firm to pay compensation to the claimants by obtaining the transfer value of their previous pensions had they not been transferred into the Sipp.
The ruling was made at the Fos adjudication stage, meaning the parties involved can accept or appeal the outcome. On appeal, the case gets put forward to the Ombudsman for final consideration.
Guinness Mahon told the Fos the sales were made on an execution-only basis. The set up included an unregulated introducer, several IFAs who were said to have signed off the applications, and the Sipp provider.
Introducer Avacade, which is currently being pursued by the Financial Conduct Authority for allegedly giving advice without authorisation, had offered the clients free pension reviews, before passing them on to Guinness Mahon as execution-only business.
A representative for Avacade could not be reached for comment.
Before accepting the business Guinness Mahon had asked regulated IFAs to 'sign it off', the Fos said. The Sipp firm had also checked samples of the pension reports given to clients.
But the Fos said these reports should have given it cause of concern because they indicated Avacade was giving advice. They were also not balanced, Fos said, and had the clear aim of getting the client to transfer.
According to the Fos, Guinness Mahon accepted 230 Sipp applications through Avacade between May 2014 and September 2015.
It found the IFAs had not carried out appropriate checks on the applications and Guinness Mahon had not carried out sufficient due diligence on the introducers they were working with.
It also found while Guinness Mahon (GMTC) had carried out some due diligence on Avacade, including a site visit and company overview, this was not enough in the circumstances, where investments were placed in high risk assets overseas with little or no diversification away.
Guinness Mahon had claimed it had had no introducer relationship with Avacade but the Fos found this difficult to believe given the sheer number of new business that had come through this channel.
The Fos also criticised the lack of a formal agreement between Guinness Mahon and the intermediaries, which it said would have been good practice.
It said: "Had GMTC conducted sufficient checks, it would be in a position where it had clear evidence that Avacade was likely providing advice, carrying out a regulated activity when it wasn't authorised to do so.
"Had GMTC acted fairly towards [the clients], I think it's more likely than not that [they] wouldn't have opened the Sipp, or entered into this transaction at all.
"I don't think GMTC acted with due diligence, care and diligence, organised and controlled its affairs responsibly or treated [the clients] fairly by accepting this business.
"And as a result I think [the clients have] suffered a financial loss that GMTC should redress.
The Fos has ruled the five claimants should receive compensation from Guinness Mahon to put them back in the position they would have been in had they not transferred their pension from their original workplace schemes.
The Ethical Forestry scheme was found to be risky despite guarantees of high returns and failed after the plantation was hit by a hurricane.
Glyn Taylor, solicitor at Anthony Phillips James & Co, the solicitors firm which represented the five claimants, said: "Our clients have all been misled by unscrupulous advisers."
"These clients simply wouldn’t have moved their money out of their original pensions had it not been for the unsolicited advice from Avacade.
"The Fos decisions are all similar in that they establish that Guinness Mahon should have known that it would not be treating the individuals fairly, as it has a duty to due under FCA conduct of business rules, if it accepted business from Avacade, so it should have refused the introduction of business."
The Fos told FTAdviser that there have been 45 complaints made against Guinness Mahon, the majority of which relate to the firm having allegedly not carried out the appropriate due diligence.
Mr Taylor added: "We have over 1,500 clients who we believe have been mis-sold Sipp investments by Avacade."
"The rulings against Guinness Mahon pave the way for others in similar situations, we’re now seeking to secure similar rulings for other clients who invested with other Sipp providers."
Guinness Mahon did not respond to a request for comment.
rosie.quigley@ft.com
