SIPP Mis-selling – Holding the SIPP provider accountable for failed investments

A landmark decision by the Court of Appeal could be a lifeline for the many investors who have lost money as a result of bad advice from unregulated firms.

Lorry driver Russell Adams was left out of pocket after transferring his pension into a Self-Invested Personal Pension Plan (SIPP) in 2012.

He did so in order to invest £50,000 into the long lease scheme of some storage unit pods which later became virtually worthless.

Overturning a key part of a previous High Court ruling which found against him, Mr Adams has now been told he is entitled to compensation.

The Pensions Ombudsman has also confirmed it will re-open its investigations into the private pension management provider, Carey Pensions, now rebranded as Options Personal Pensions.

This news is sure to be welcomed by a further 580 people who, like Mr Adams, invested pension money in the storage pod units run by the Blackburn-based company, Store First Ltd, and who also passed through Carey's books.

What happened with Mr Adams and Carey Pensions?

Mr Adams alleged that Carey Pensions mis-sold him a SIPP and that it used an unregulated introducer based in Spain, called CLP Sociedad Limitada (CLP), which was not authorised under UK law to give financial advice and which was also receiving commissions of about 12% from Store First.

Although CLP was not authorised, Mr Adams told the court that it advised him to:

• Transfer his pension away from Friends Life;
• Move the proceeds into the Carey SIPP;
• Invest his SIPP in the storage unit pods.

Carey Pensions always claimed it had warned Mr Adams that the investment was high risk. As a result, it said it was not at fault and that Mr Adams himself was to blame for his losses.

Unbeknown to Mr Adams, in 2010 the Financial Conduct Authority (FCA) had posted a warning notice about Mr Terence Wright, who jointly ran CLP, declaring that he was not authorised under the Financial Services and Markets Act 2000 to carry out regulated activity in the UK.

What's more, 'he may be targeting UK customers via the firm Cash In Your Pension', the FCA warned.

What did the Appeal Court say?

The outcome of the case hinged on the question of provider responsibility when accepting investments into a SIPP.

Although Carey Pensions won the first round of the court battle with claims on all grounds dismissed in May 2020, the Court of Appeal did not agree with this decision.

Instead, it concluded that at no time was CLP authorised by the FCA to give investment advice or to make arrangements relating to investments.

It declared that because Mr Adams entered into the Carey SIPP as a consequence of CLP's actions, it was therefore unenforceable against him. This meant he was entitled to 'unwind' it and recover the money paid into it from Carey as well as compensation for his losses. Carey had not done enough to absolve itself of responsibility for allowing Mr Adams to make this unsuitable investment.

What are the implications of the Adams v Carey Pensions case?

The judgement sets out a clear explanation of the law and will be scrutinised by both SIPP providers and those advising people who have lost their pension funds to unscrupulous introducers peddling esoteric, high risk investments to trusting and unsophisticated members of the public.

It undoubtedly serves as a warning to regulated firms like Carey Pensions of the many risks of choosing to deal with unregulated firms like CLP and the consequences if those firms break the rules.

Get in touch

If you have lost money in a scheme like this, you should take urgent advice to establish your position and the prospects of a successful claim against the SIPP provider.

Wards Solicitors' James Taylor is highly experienced in this area of the law and will usually offer a free desktop review of the situation to see what can be done.

Strict time limits exist and these frequently trip up investors who feel they can await the outcome of a failed investment before complaining about the way it has been recommended to them.

Time for bringing a claim will often run from the day that an investor becomes aware that the investment was likely to fail, rather than from the day that they are sure the investment is likely to fail.

This subtle difference has long been a trap for the unwary so please don't delay. After all, your retirement savings may be at risk.

Wards Solicitors' Partner James Taylor specialises in Financial Services disputes.