Carey Pensions: When is a Sipp provider liable?

  • Describe the main issue the Carey Pensions case hinged on
  • Explain what differentiates this case from the Berkeley Burke case
  • Identify the implications of the ruling for the Sipp industry

Did Carey carry out inadequate due diligence?

Mr Adams claimed that there were enough "red flags" about CLP as introducer to mean that Carey should not have dealt with it, including that Carey was aware that CLP was receiving significant commission from the store pod company.

The judge rejected this argument. He noted that the FSA had been satisfied with Carey's procedures following its visit. 

He held this demonstrated that the watchdog was aware that unregulated introducers were introducing investors so that Sipps could be established on an execution-only basis, and that it had not suggested at the time that this was a breach of Sipp provider duties. 

Mr Adams also argued that Carey's decision in May 2012 to stop accepting new business from CLP (once it became aware that inducement payments were being made) should have happened much earlier.

In 2010 the FCA had issued a warning about one of the directors involved with the investment who was not authorised to carry out regulated activity.

Carey accepted it did not check this until May 2012 shortly after which it ceased to accept new introductions.

However the judge held that Carey was not at fault for allowing the claimant's investment to proceed in circumstances where he had already signed all the paperwork and the investment process was near to completion.

One notable aspect of this case relates to the fact that the pleadings on behalf of Mr Adams did not allege that Carey should have carried out greater due diligence on the store pods investment.

An attempt was made at trial to argue this point, but because it had not been raised in the pleadings, the judge gave this short shrift. Nevertheless, to the extent that he could form a view, he still held that Carey's processes were adequate. 

The investigations Carey had carried out in relation to the store pods company were, consistent with Sipp provider practice at that time, focussed on whether the investment was acceptable to HMRC, rather than whether it was suitable for members.

Duty to act "honestly, fairly and professionally"

Both Mr Adams and the FCA argued that Carey had breached the FCA rule which requires a regulated firm to act "honestly, fairly and professionally in accordance with the best interests of its client". 

The court disagreed, holding that the duty had to be construed in the context of the valid contractual arrangements between the parties which (along with the product literature) had made clear to Mr Adams that he was responsible for his investment decisions and that Carey would act on his instructions.

What are the wider implications of this judgment?


Questions appear on the last page of this article.