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Important judgment for SIPP Providers and Investors

The Court of Appeal, through the decision in Adams v Carey has set out an important judgment as regards the scope of duties owed by SIPP operators, as well as the statutory construction of section 27 of the Financial Services and Markets Act 2000.

Adams v Carey centred on whether the pension administrator specialist Carey Pensions was at fault for carrying out an individual’s investment request that subsequently was proven worthless. The Court of Appeal held that Mr Adams can recover the £50,000 he placed into his self-invested personal pension plan at Carey Pensions. The funds were used to fund a risky investment that subsequently lost value and eventually was deemed worthless. This overturns the High Court’s decision in May 2020 which was in favour of Carey.


Mr Adams was advised by an unregulated Spanish based introducer, CLP Brokers, to place his savings into pods offered by a storage business, inside a SIPP provided by Carey. When Mr Adams’ investments failed to perform, he sued the SIPP provider. Because CLP is unregulated, in the event that it advises or arranges a regulated investment, pursuant to section 27 of FSMA, liability may fall upon the SIPP Provider.

As the judge stated,

“A key aim of FSMA is consumer protection. It proceeds on the basis that, while consumers can to an extent be expected to bear responsibility for their own decisions, there is a need for regulation, among other things to safeguard consumers from their own folly…”

While SIPP providers were not barred from accepting introductions from unregulated sources, section 27 of FSMA was designed to throw risks associated with doing so onto the providers. Authorised persons are at risk of being unable to enforce agreements and being required to return money and other property and to pay compensation regardless of whether they had had knowledge of third parties’ contraventions of the general prohibition;”

The key point was whether or not CLP could be considered to have engaged in a regulated activity. The relevant activities considered by the court were advising upon regulated investments and arranging regulated investments.

The judge held that, although the investments in storepods were not regulated investments, and thus not covered by the RAO,

“if a person praises an unregulated investment which would need to be acquired by means of a particular vehicle, it may very well, depending on the particular facts, be right to see him as advising that the vehicle be adopted. In short, advice on an unregulated investment is sometimes capable of involving advice on a specified one within the scope of article 53 of the RAO and so of being regulated activity.”

In other words, CLP’s recommendation that Mr Adams invest in storepods carried with it advice that he transfer out of his Friends Life policy and put the money into a Carey SIPP. Investment in storepods may have been the ultimate objective, but it was to be gained by transferring out of his current pension policy and into a Carey SIPP, which was held to be advice upon a regulated investment i.e. the SIPP.

The judge also held that CLP had arranged the investment based upon the following activities,

“The fact remains that CLP “pre-completed the application form so that [Mr Adams] could just sign it” (to quote Mr Adams’ witness statement). It also told Mr Adams of documents he would need to supply for anti-money laundering purposes and explained that the “completed forms and [his] anti money laundering documents will be collected by courier and taken to Carey Pensions UK”. “Arrangements” being a “broad and untechnical word” in article 25 of the RAO as well as section 235 of FSMA, it is apt to describe what CLP did.”

In so deciding, the Court of Appeal unanimously overturned the previous ruling and found that Mr Adams was advised in contravention of the Financial Services and Markets Act 2000 by CLP. As the SIPP was entered into as a consequence of CLP’s actions, the agreement is unenforceable against Mr Adams. He is therefore entitled to unwind it and recover the money he paid into, along with compensation that reflects the losses suffered. Moreover, the Court of Appeal decided that Carey should not have accepted Mr. Adams’ funds and, as a regulated firm, it had to accept the risk and implication in choosing to deal with an unregulated entity.

This a profoundly important judgment for SIPP providers and also investors in SIPPs who dealt with unregulated introducers, which is by no means the majority of the SIPP market. For most SIPP providers, the ruling will have no direct impact. However, for providers who historically have relations with unregulated introducers the impact could be significant, with SIPP providers potentially liable for losses that consumers have suffered as a result of investments arranged or advised upon by an unregulated firm.

Martin Woodford is a Partner at Ward Hadaway who specialises in pension and investment disputes. If you have any questions about the topics covered in this article, do contact him directly.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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