Judge finds in favour of Carey Pensions in 'landmark' SIPP ruling

The ‘long awaited judgement’ in the Adams v Carey Pensions case has now been published, with the claims against Carey Pensions dismissed on all grounds.

The judgement, which related to a claim for loss of value in an investment which was held within a self-invested personal pension (SIPP), was heard in March 2018.

Mr Adams case was based on the fact that he was introduced by an unregulated introducer, and that he had transferred an existing pension fund into a SIPP administered by Carey, subsequently instructing his SIPP to purchase a number of rental units from Store First.

Mr Adams subsequently sought to recoup damages from Carey after the investment failed to perform as well as expected though, also looking to unwind his contract with provider.

Carey however, argued that as a non-advisory pensions administrator, it had carried out the transaction as instructed, on an execution-only basis.

The case focused on three core principles, notably that Carey had failed to act in accordance with COBS rules, as well as a novel claim under s.27 FSMA and a joint venture/tortfeasor claim against the firm.

Despite submissions from the Financial Conduct Authority, HHJ Dight stated that it was "obvious that the correct starting point" in ascertaining the cope of obligations imposed by COBS was the contract between parties, "because it is common ground that not every COBS obligation" applies to all firms.

Furthermore, he stated that all contractual documentation between the parties were clear that Carey was acting on an execution only basis, and that as such, Mr Adams was responsible for his own investment decisions.

In regards to the s.27 FSMA claim, HHJ Dight found that the actions of CL&P Brokers fell far short of arranging the investment, clarifying that the point at which the issue must be considered is when Mr Adams gave his instruction to invest, as prior to that, Mr Adams was not bound to continue and had not suffered any loss.

Mr Adams also made a joint tortfeasureship claim against the firm, highlighting that CLP Brokers, the firm which initially contacted him and introduced him to Carey, was expressly prohibited from advising prospective members within Carey's Terms of Business.

However, the judge clarified that the correct test for this is set out in Sea Shepard, emphasising that the “facts are entirely inconsistent with any conclusion that [Carey] assisted in the commission of a tort by CLP”.

The ruling has been praised by industry experts for bringing greater clarity around the duties and obligations of a SIPP provider, with Eversheds Sutherland, who represented Carey, highlighting that a number of similar cases had previously been upheld by the Financial Ombudsman Service (FOS).

Eversheds also explained that the court's approach to determining the scope of COBS will have “far reaching consequences for all financial institutions”, with a particular focus on the idea that the scope of COBS must be considered through the lens of the individual contractual arrangements with customers.

Commenting on the ruling, Carey (now rebranded as 'Options, for your tomorrow') managing director, Christine Hallett, 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 judgement 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 judgement recognises within it our approach to implementing strong contractual agreements and documentation, together with robust systems, controls and processes within the business."

She continued: "It is a judgement 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."

STM, who acquired Carey Pensions in 2019, have also welcomed the judgement and the “clear precedent” it set given the increased litigation and use of the FOS in determining complaints.

STM Group chief executive, Alan Kentish, commented: "This judgment gives a solid legal footing for these to now be considered in the context of this ruling.

"The STM Board considers that potential implications for any financial institution carrying out execution-only business to have become wholly responsible for their client's decisions would be 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."

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