Avid pension legislation enthusiasts will have noted with interest the judgement in the court case Adams vs Carey Pensions, which was finally delivered in May after more than two years of legal wrangling.
The case centred on whether the pensions administration specialist Carey Pensions was at fault for carrying out an individual’s investment request which subsequently went awry.
Adams’s claimed Carey was at fault when it carried out investment instructions to purchase rental units in a storage pod lease in Blackburn.
The investments were ultimately left worthless and Adams out of pocket, something he blamed Carey for as they had executed the investment and not subsequently stopped it.
Fortunately for Carey Pensions, the High Court dismissed client Russell Adams’s case on all counts. Carey came into the firing line as it was the only regulated firm involved in the transaction.
The firm that recommended the Store First investments to Adams, Commercial Land and Property Brokers (CL&P), was an unregulated introducer based abroad.
On 18 May the High Court ruled that Carey had acted as it should have on an execution-only basis and was not liable for the losses suffered by Adams in purchasing unregulated investments. Much of this had to do with the fact that Adams admitted he took on the investments thanks to a £4,000 inducement offered by CL&P, which seemed to be the kicker that spurred him to go ahead with it.
This ruling contravenes separate findings in another similar case, also involving Carey and CL&P, by the Financial Ombudsman Service around the same time in May, which has caused confusion as to who is correct. The FOS found in favour of the complainant, Mr T, against the same unregulated introducer firm CL&P for recommending the same unsafe investments.
The Adams vs Carey judgement is expected to go to appeal, but Carey is clear it believes that the FOS, in its other ruling, is ‘not sticking to the law’ in finding against it despite court rulings elsewhere.
Experts have now warned that it creates a bizarre situation whereby, the outcome of the case is determined by where the ombudsman takes it. Pre- and post-Adams vs Carey, so to speak.
What matter is this to advisers?
This case is no doubt messy and, despite the ruling, is not over. However, advisers can take some lessons from it.
Taken in conjunction with the recent findings of the FCA on DB pension transfers out of the British Steel Pension Scheme, one must assume that regulators and other authorities are looking to come down hard on someone if losses are incurred.
Execution-only providers don’t seem to be in the crosshairs, in legal terms at least. That means advisers and introducers who recommend such investments will be.
The judge in the case found that Carey did nothing but carry out the instructions of its client. What mattered then in the loss of Adams’s money wasn’t that a Sipp provider accepted a bad investment, it was that Adams had been advised by an unscrupulous firm to buy something worthless with his pension.
Whether advisers are more or less on the hook after these kinds of cases remains to be seen, but pressure is already being applied with changes such as the contingent charging ban announced by the FCA.
Sipp providers will breathe a sigh of relief at the judgement, but there are still lots of high-risk investments out there and this won’t be the last time we see an Adams vs Carey.
The case is more than unfortunate for Adams. Unless an appeal reverses the High Court’s ruling it is unlikely he will ever see his money again. His only recourse was to go after the Sipp provider, because it is a regulated onshore firm. But this ruling demonstrates that, under the letter of the law, it isn’t the Sipp provider’s fault.