Carey pointed out under the Financial Conduct Authority’s conduct of business sourcebook it was obligated to execute investment instructions as this effectively said once the Sipp has been established, it is obligated to execute the specific instructions of its client.
It also said it undertook due diligence on CL&P and this did not reveal any reason why Carey should not accept introductions from CL&P, at the time of Mr S’s investment.
But when the Fos asked Carey to provide information about its relationship with CL&P, it emerged 551 clients had been introduced to Carey via CL&P.
Ombudsman John Pattison said Carey had failed to conduct sufficient due diligence on CL&P and should have realised it should not accept business from the introducer, and ended its relationship with it before Mr S’s application was made.
Pattison came to this conclusion because he said Carey ought to have undertaken “sufficient enquiries” into CL&P to understand who its directors were, and checked the FSA’s warning list as part of its due diligence.
Had it carried out these checks it would have discovered that CL&P’s director was Mr Terence Wright, and that he was on the FSA warning list, Pattison said.
He said: “CL&P’s director Mr Terence Wright’s presence on the FSA warning list should have led Carey to conclude it should not do business with CL&P. I note this is a view which was held by Ms Hallett when she gave evidence to the court during the Adams v Carey hearing.”
But Carey said the FSA notice was not entered onto World Check (the checking service it used) until October 2011 - after Carey had carried out its checks on CL&P’s other representatives and after it had started accepting business.
Therefore, it said if it had run a check on Mr Terence Wright at the outset, this would not have revealed his entry on the FSA’s warning list.
Pattison said that as a regulated Sipp operator, Carey should have been mindful of the FSA’s list of alerts and, in compliance with its regulatory obligations, it ought to have checked this list before accepting business.
In addition, had it done sufficient due diligence, the provider would have found the introducer was acting “without integrity” as it had not told it the truth when asked about cash incentives.
In terms of due diligence on the Store First investment, Pattison said Carey should not have accepted either the application for Mr S’s Sipp from CL&P or the investment.