1 APRIL 2021: The Court of Appeal has found in favour of our client – Russell Adams – and against his Self-Invested Personal Pension (“SIPP”) operator – Options UK Personal Pensions LLP (“Options”) formerly Carey Pensions UK LLP – in a landmark decision that will have repercussions for the entire financial advice market.
In its Judgment, a Court of Appeal constitution of Lord Justice Newey, Lady Justice Rose and Lady Justice Andrews, unanimously found that Mr Adams was advised, in contravention of the general prohibition found at section 19 of the Financial Services and Markets Act 2000 (“FSMA 2000”) by CLP Brokers; an unregulated introducer based in Spain (“CLP”). At no time was CLP authorised by the Financial Conduct Authority (“FCA”) to give investment advice, or to make arrangements relating to investments.
In what is thought to be the first reported case dealing with the operation of sections 27 and 28 of FSMA 2000, the Court has declared that, because the SIPP was entered into as a consequence of CLP’s contraventions of the general prohibition, the agreement is unenforceable against Mr Adams, who is entitled to ‘unwind’ it and recover the money he paid into it, as well as compensation to reflect the losses he has suffered as a consequence.
Tim Hampson, Partner at Wixted & Co. Solicitors, who represented Mr Adams throughout the proceedings said:
“We are delighted with the Court of Appeal’s well-reasoned and common-sense decision. It has been a very long road for Mr Adams, but we hope that he will now finally be able to move on with his life and enjoy his retirement. In addition, the Judgment will assist many other investors who have lost funds because of investment advice given to them by unregulated parties. We agree with the Court of Appeal’s fair warning to regulated firms that, if they choose to deal with an unregulated entity, who they cannot necessarily control, then the risk is squarely on them if that entity crosses the perimeter and contravenes the general prohibition.”
The original proceedings, Russell Adams v Options SIPP UK LLP (formerly Carey Pensions UK LLP)  EWHC 1229 were heard at the High Court in March 2018. There followed an unprecedented two-year delay whilst the trial Judge, His Honour Judge Dight CBE, prepared his Judgment.
In May 2020, Judgment was handed down by His Honour Judge Dight CBE and Mr Adams’ claim was dismissed. The Judge found that, because Options, formerly Carey Pensions UK LLP, acted on an ‘execution-only’ basis, it was entitled to rely upon its contractual documentation to exclude liability for Mr Adams’ losses. In short, the Judge found that Options’ paperwork took precedence over the statutory framework put in place in order to protect consumers by Government and the FCA.
Mr Adams sought and obtained permission to appeal. A remote hearing was held by video conference on 2-4 March 2021 at the Court of Appeal.
The Court of Appeal’s decision
In the leading Judgment, Lord Justice Newey found that CLP advised Mr Adams to: (i) transfer out of his existing pension fund, and, (ii) thereafter, transfer the proceeds into a SIPP operated and administrated by Options. The purpose of the transfer was so Mr Adams could then invest his pension fund into an unregulated and high risk investment scheme, called Store First Limited ‘storepods’, a storage facility on a disused industrial site in Blackburn.
Whilst the Court of Appeal found that CLP’s endorsement of the investment was, taken by itself, unregulated, it adopted a holistic approach to the entire advice process and found that CLP encouraged Mr Adams to achieve its proposed aim by transferring his pension fund out of his previous policy held with Friends Life and into the SIPP – both of these recommendations were investment advice that was capable of being regulated.
The Court also found that certain activities undertaken by CLP Brokers – procuring a Letter of Authority authorising Options to liaise with CLP, the undertaking of certain anti money-laundering tasks and the completion of the SIPP Application Form – involved CLP Brokers making arrangements for Mr Adams to transfer out of his previous policy and, more clearly, to put the money into the Options SIPP. For example, the Court set out in its Judgment how CLP arranged for Mr Adams’ completed application paperwork to be collected by a courier and taken directly to Options, so it could establish the SIPP. The Court found that these actions were significantly instrumental and brought about both the transfer from the previous policy and the transfer into the SIPP.
Having decided that CLP had contravened the general prohibition, and that its breaches had sufficient ‘causal potency’ to cause the SIPP to come about, the Court then refused to exercise its discretion to allow Options to enforce the SIPP agreement anyway.
In the leading judgment, Lord Justice Newey listed five (non-exhaustive) reasons why the Court would not exercise its discretion in favour of Options saying;
(i) A key aim of FSMA 2000 is consumer protection.
(ii) While SIPP providers were not barred from accepting introductions from unregulated sources, section 27 of FSMA 2000 was designed to throw the risks associated with doing so onto the providers.
(iii) Over a period of only about six months, some 580 of Options’ clients invested in storepods and it is hard to suppose that 580 people would all spontaneously decide to make such an investment. There was thus reason for Options to be concerned about the possibility of CLP advising on investments.
(iv) By May 2012, Options knew enough about CLP’s activities in order to stop doing business with them, but still allowed “pipeline” clients like Mr Adams to proceed to make an investment into storepods.
(v) Although Mr Adams had been advised by CLP in February 2012, the actual transfer of his pension was not effected until after Options had terminated its relationship with CLP.
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Founded 20 years ago, award-winning solicitors Wixted & Co. are a dynamic and dedicated litigation practice, specialising in Claimant Professional Negligence, Pension and Investments litigation, Occupational Disease and Medical Negligence work. We act for victims seeking justice whether injured people or those who have lost money through poor professional advice.