CAREY WINS LANDMARK SIPP LIABILITY CASE

Options SIPP UK LLP is pleased to announce the outcome of the judgment in the long-awaited Adams v Carey case, which has been found wholly in favour of Carey Pensions UK LLP (“Carey”), with Mr. Adams’ claims against Carey being dismissed on all grounds.

The judgment was handed down this morning and relates to a claim by Mr. Adams against Carey Pensions UK LLP for loss of value in an investment which was held within a Self-Invested Pension Plan (SIPP). The case was heard in March 2018.

The case was based on the fact that Mr. Adams was introduced by an unregulated introducer, and that Mr. Adams transferred an existing pension fund into a SIPP administered by Carey, and instructed that his SIPP purchase a number of rental units from Store First. Carey is a non-advisory pensions administrator and carried out the transaction on an execution-only basis as instructed. Mr. Adams’ investment in Store First did not perform as he had expected, which resulted in Mr. Adams bringing a claim against Carey seeking damages.

A concise summary of the judgment can be found at https://www.eversheds-sutherland.com/global/en/what/articles/index.page?ArticleID=en/Financial-services-and-dispute-investigation/Clarity_for_SIPP_providers, who acted as the lawyers for Carey.  

Christine Hallett, Managing Director of Carey (now rebranded as Options “for your tomorrow”) 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.  

Christine Hallett, Managing Director of Carey

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 implementing 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.

We now look forward to continuing to build our UK businesses with our new name Options “for your tomorrow”, new brand positioning and product portfolio along with maintaining our high service levels for all our clients.”

Alan Kentish, Chief Executive of STM Group Plc, added:
“The judgment is a very welcome and clear precedent for the whole of the UK financial services sector given the increased litigation and use of the Financial Ombudsman to determine complaints. This judgment gives a solid legal footing for these to now be considered in the context of this ruling.

Alan Kentish, Chief Executive of STM Group Plc

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.

STM is keen to put this case behind it and ensure its UK business, Options for your tomorrow, realises its full potential.”

Details of the court decision:

  • The claim was based on three different principles; 1) that under the FCA’s Conduct of Business (COBS) 2.1.1 that Carey had failed to act fairly, honestly and in accordance with the best interests of its client; 2) that under FSMA section 27 Carey was responsible for any advice (known or otherwise) given by the introducer and that the introducer ‘arranged’ the underlying investment; and, 3) that Carey was in a joint venture with the introducer and was thus liable as joint tortfeasor for its actions.
  • In all three claims, the judge found in favour of Carey.
  • In the context of COBS 2.1.1R, the judge found that all of the contractual documentation between Carey and Mr. Adams was clear that Carey was acting on an execution only basis; that it was not advising Mr. Adams; that the investment in Store First was high risk and/or speculative; and that Mr. Adams was responsible for his own investment decisions. In that context, the judge concluded that COBS 2.1.1R could not be read as imposing on Carey a duty to advise or comment on the suitability of the SIPP or investment, as that would be unlawful (noting that Carey does not hold the relevant permissions to advise); or to reject a ‘high risk’ investment. The court found that Mr. Adams had to take responsibility for his investment decision.
  • In addition, under Claim 2 the judge found that the actions of the introducer fell far short of ‘arranging’ the investment, and that, crucially, the point at which the issue must be considered is when Mr. Adams gave his instruction to invest. Prior to that point, Mr. Adams was not bound to continue, nor had he suffered any loss. Also, the judge found that, on the evidence, CL&P did not advise Mr. Adams to enter into the SIPP.
  • On the final point, the judge concluded that facts were entirely inconsistent with any conclusion that Carey assisted in the commission of a tort by the introducer and that there was no common design.
 

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