Judge has overturned Carey case and finds against pension provider, as FOS orders them to compensate client.
The Court of Appeal has ruled against Carey Pensions in a landmark case, overturning a previous High Court ruling. The outcome is likely to have massive ramifications for the rest of the pension industry, with providers now being deemed responsible when accepting investments into self-invested personal pensions (SIPPs).
In a week to forget for the pension provider, Carey has also been ordered to pay compensation to a client by the Financial Ombudsman Service after it found it had failed to meet its regulatory obligations.
Carey Pensions lose Court of Appeal Landmark Case
Carey Pensions, now known as Options, originally won the high profile case against claimant Russell Adams in May 2020. In a judgment published on April 1st 2021, the Court of Appeal unanimously overturned that ruling and found Adams was advised, in contravention of the Financial Services and Markets Act 2000.
Adams had claimed that Carey Pensions had mis-sold him a SIPP. Adams and his lawyers accused the SIPP provider of using a Spain-based unregulated introducer who facilitated investments into the notorious Store First unit bods which were an unsuitable investment and are now deemed “worthless”.
The unregulated introducer in question was Commercial Land and Property Brokers (CLP). The court has said at no point was CLP authorised by the Financial Conduct Authority to give investment advice, or make arrangements relating to investments.
The Court of Appeal declared that, because the SIPP was entered into as a result of CLP’s actions, the SIPP agreement is unenforceable against Mr Adams, and he is therefore entitled to “unwind” it and recover any money that has been paid into it.
The case has been seen as a landmark legal dispute, and could now open up pension providers like Carey Pensions to more similar mis-sold claims.
The FOS finds against Carey in 81-page due diligence decision
After a week to forget, news broke that Carey Pensions has been ordered to compensate a client after the Financial Ombudsmans Service found it had failed to meet is regulatory obligations when accepting another self-investment personal pension application from the same unregulated introducer.
The ombudsman has found that Carey had been introduced to hundreds of clients by the same introducer in question, Commercial Land and Property Brokers (CLP).
According to the judgment, released on February 26th 2021, the problem first arose when Mr S. was cold-called by unregulated CLP introducer and told he could get a much better return on his pension if he switched it to a SIPP and invested in high-risk Store First. He was promised 12 per cent guaranteed returns for three or five years.
In October 2012, Mr S. signed a document to invest £39,000 in Store First and confirmed he was fully aware that this investment was an alternative investment and as such was high risk and/or speculative.
In the finding, the FOS said Carey Pensions had failed to conduct sufficient due diligence on CLP and should have realised it should not accept business from the introducer, and ended its relationship with it before Mr S’s application was made.
Although Mr S. was warned of the high-risk nature of Store First and declared he understood that warning, Carey failed to act on, nor did it share significant warning signs, with Mr S so that he could make an informed decision about whether to proceed with the investment.
As a result, the FOS has ordered the firm to return Mr S to the position he would now be in if he had not transferred his pension.
It must also take ownership of the Store First investment if possible and pay £500 for the trouble and upset caused.
How can Smooth Law Commercial help?
Have you had dealings with either Carey Pensions or CLP? Do have a SIPP which has left you out of pocket after the promised returns never materialised? Smooth Commercial Law can help.
We are acting for a number of clients who were advised by both regulated and unregulated advisors to transfer money out of their traditional pension into a SIPP, and to then invest significant sums of money into high-risk investments.
For most, these investments are completely unsuitable are only appropriate for high net worth individuals or sophisticated investors.
At Smooth Commercial Law, our team of experts have extensive experience in dealing with a whole manner of claims that arise from negligent and/or unsuitable financial advice. We are seeing an increase in claims surrounding Sipp providers like Carey Pensions, and have managed to secure compensation for many of our clients.
Should you have a claim, we can deal with your case and look to recover compensation for not just your loss of investment but also any adverse tax liabilities that you may now be facing as well.