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Out-Law News 2 min. read

High Court rules in favour of SIPP pensions provider in mis-selling case

The High Court in England has given clarity over the obligations of self-invested personal pension (SIPP) providers in a long-awaited judgment on a mis-selling claim.

The court ruled that pensions provider Carey Pensions UK (now known as Options Sipp UK) was not liable for losses suffered by Robert Adams after he invested his pension fund in store pod rentals through a scheme run by Spanish brokers CLP.

Adams claimed that CLP was an unauthorised and unregulated introducer of business to Carey and there was a joint venture between the two firms. As a result, he said Carey was liable for torts committed by CLP, as it had taken the risk that the brokers might make unsuitable recommendations for investments.

He also said Carey and CLP relied on potential investors not seeking independent financial advice before entering into an agreement for Carey to create a SIPP wrapper for the investments, and that the investment he made was “manifestly unsuitable”. He said Carey had breached regulations, breached its duty to comply with conduct of business rules, and was liable for CLP’s negligent investment advice.

Handing down judgment on the case, which was heard in March 2018, Judge Dight said that Carey did not know what advice CLP had given to Adams beyond recommending the investment, and recommending Carey as a provider of SIPPs which could be used as a wrapper. Judge Dight said there was no way in which Carey could have been aware of any negligent advice given to Adams by the brokers.

The judge said there was nothing identified to suggest that the SIPP itself, as opposed to the store pod investment, was unsuitable and the contract between Adams and Carey made it clear the firm did not have a duty to consider the suitability of the SIPP or the underlying investment.

He said any losses suffered were caused by Adams’ decision to proceed with the investment, despite knowing that it was high-risk or speculative, because he wanted a £4,000 cash-back inducement which he had been offered by CLP.

The Financial Conduct Authority (FCA) intervened in the case, making submissions in particular in relation to conduct of business rules.

Pensions litigation expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law, said: “Early indications are that the claimant will seek permission to appeal the decision – and it is conceivable the FCA, whose submissions seem to have been largely rejected, could appeal too. It was an exceptionally long delay between the hearing and judgment – over two years – so that will have presented challenges for the judge but also now for the parties in the event of an appeal."

“Even if not successfully appealed, this will not be the last of these types of claims against SIPP providers. The evidence in this case suggests particularly robust agreements and documentation, but there will have been a variety of approaches taken by different SIPP providers throughout the industry – so that could lead to different outcomes,” Fairhead said.

“I would anticipate though seeing more complaints processed through the Financial Ombudsman Service rather than through High Court claims like this one,” Fairhead said.

Pensions expert Simon Laight of Pinsent Masons said: “The case highlights the importance of having clearly drafted documentation, both customers’ terms and conditions and terms of business with introducers, making clear where the demarcation of responsibility lies. SIPP operators would do well to review their documentation going forward.”

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