Judge sides with SIPP provider Carey Pensions in long-awaited landmark case

Hannah Godfrey reports

Carey Pensions has won an ongoing legal battle against former client Russell Adams, with Adams’ claims dismissed on all grounds.

The judgment was handed down on Monday morning (18 May) and related to a claim by Adams against Carey Pensions for loss of value on an investment that was held within a self-invested personal pension (SIPP).

The case was heard in March 2018 and the result has been keenly awaited because it will now give clarity on the duty and obligations of SIPP providers.

Christine Hallett, managing director of Carey, which has since been rebranded as Options Pensions, said: “We acknowledge this isn’t the outcome the client was looking for, we do have sympathy for his situation and the fact that, as a result of his decisions, the investments he chose and instructed us to invest in have lost value. That said, we are pleased that the judgment has now been delivered, and that the judge has found in our favour on all counts.

“It has been a long time coming and whilst we were confident of our position, the lengthy, comprehensive and detailed judgment recognises within it our approach to implement strong contractual agreements and documentation, together with robust systems, controls and processes within the business. It was also clear that, as a SIPP provider, we are expected to carry out execution-only business based on decisions made by our clients.

“It is a judgment that has been long awaited by the SIPP industry and consumers alike, and gives clarity to what is expected of a SIPP provider under English law and the FCA Conduct of Business Principles when acting upon the instructions of a client. In addition, it has given a much better understanding of the legal relationship between an introducer and the service provider, which will provide valuable guidance for both consumers and industry professionals.”

The case

Lorry driver Russell Adams had alleged Carey Pensions mis-sold him a SIPP. He and his lawyers accused the SIPP firm of using a Spain-based unregulated introducer to facilitate investments in Store First unit pods.

In July 2012, Adams invested £50,000 into Store First unit pods. Over the years, the funds have depleted and are now virtually worthless.

During the 2018 trial, Adams’ legal representatives argued the pension administrator breached Financial Conduct Authority COBS rules that dictate a firm must act in a client’s best interest. They claimed that, if the firm had been doing so, it would have declined to give business to this sort of “high-risk and highly speculative investment”.

They also argued that, if Adams had received “competent financial advice”, it was unlikely he would have been put into a SIPP in the first place.

Carey’s defence team argued the pension administrator was “blameless” for the loss, however, but the client was not.

The court heard Carey Pensions had warned Adams the investment was high-risk and highly speculative, but Adams chose to go ahead anyway to claim a £4,000 inducement from the introducer, which Carey Pensions chief executive Christine Hallett said the firm reported to HM Revenue & Customs.

Carey’s lawyers added that SIPP providers were under no obligation to ascertain to what extent an investment is high-risk and reject that investment.

‘A more confident future’

Alan Kentish, chief executive of STM Group, which bought Carey Pensions in 2018, said the judgment would set a “clear precedent” for the whole of the UK financial services sector, given the increased litigation and use of the Financial Ombudsman to determine complaints, which would now have to now be considered in the context of this ruling.

“The potential implications for any financial institution carrying out execution only business to have become responsible for their client’s decisions would be, in my opinion, wholly inequitable and inappropriate. I am sure many financial service providers and institutions, as well as their respective trade associations, would wholeheartedly agree and can now look to the future with greater confidence post this ruling,” he added.