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Fos finds against Carey in 81-page due diligence decision

Fos finds against Carey in 81-page due diligence decision

Carey Pensions has been ordered to compensate a client after the Financial Ombudsman Service found it had failed to meet its regulatory obligations when accepting a self-invested personal pension application from an unregulated introducer.

In an 81-page decision dated February 26, the ombudsman concluded Carey, which now goes by the name of Options, should have refused to accept the business from the introducer, which included a high-risk unregulated investment.

The Fos said had Carey acted in accordance with its regulatory obligations and best practice, it is “fair and reasonable” to conclude that in the circumstances it should not have accepted the client’s application from the introducer to open a Sipp at all.

The ombudsman found Carey had been introduced to hundreds of clients by the same introducer.

The Fos's decision came before the Court of Appeal’s decision last week (April 1) to side with claimant Russell Adams and find against Carey Pensions, overturning a previous High Court ruling in a landmark decision.

Carey originally won the case with claims against the Sipp provider being dismissed on all grounds in May 2020.

But the Court of Appeal unanimously overturned that ruling and found Adams was advised, in contravention of the Financial Services and Markets Act 2000, by CLP Brokers, an unregulated introducer.

The Fos case

The client, who the Fos called Mr S, complained via a claims management company about his transfer to a Sipp and the investment made following said transfer.

According to the judgment, released on February 26, the problem first arose when Mr S was cold-called by unregulated introducer Commercial Land and Property Brokers (CL&P) and told he could get a much better return on his pension if he switched it to a Sipp and invested in high-risk Store First.

Mr S signed a letter of authority, giving Carey permission to deal directly with CL&P in relation to his pension transfer, in April 2012. He signed an application form for a Carey Sipp soon after and £42,477 was sent to Carey in September.

In October 2012, Mr S signed a document to invest £39,000 in Store First and confirmed he was fully aware that this investment was an alternative investment and as such was high risk and/or speculative.

He also confirmed he was aware Carey acted on an execution-only basis and had not provided any advice.

Mr S said he had had no plans to change his pension and invest but was cold-called by CL&P and was promised 12 per cent guaranteed returns for three or five years.

He also received a £2,000 “cash back” incentive from CL&P after the investment was made.

Mr S argued that he had suffered a loss from the Store First investment and that Carey should compensate him for this loss.

But Carey argued it did not provide any advice to clients in relation to the establishment of a Sipp, transfers in or the underlying investments.

It also said Mr S had invested on an execution-only basis and this had been made clear in communications with him, the documentation issued to him, and the paperwork he read, signed and agreed to.