Mr Adams claimed Carey had failed to put in place systems to prevent unsuitable investments facilitated by unsuitable introducers.
Was Carey at fault for accepting "execution only" business?
Mr Adams criticised Carey's execution-only model but the court held he was the author of his own misfortune.
Mr Adams had admitted in cross-examination that he knew the investment was high risk and he would still have made the investment even if he had obtained financial advice, as he was motivated by the £4,000 payment offered by CLP.
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"
