The Court of Appeal has sided with the Financial Ombudsman Service and thrown out the latest judicial review brought by Options Pensions, formerly known as Carey Pensions, which challenged a Sipp ruling.
In a decision published yesterday (May 20), the Court of Appeal dismissed the judicial review against a Fos decision.
The provider was seeking to challenge a Fos decision which upheld a complaint on the basis there was inadequate due diligence on an unregulated introducer and unregulated investment.
The case found Carey, as it was known then, operated as an “execution-only” Sipp operator carrying out a customer’s investment instructions but not offering any regulated advice.
While the Fos ruled that Carey was required to carry out due diligence on introducers and investments, Options argued this was not the case.
But Lady Justice Asplin ruled: "It is of note that it is clear that Carey were conducting pre-contract due diligence, albeit haphazardly, and that their documentation was geared to do so. The opening paragraphs of their 'non-regulated introducer profile' [...] make it clear that they considered that they were required to carry out due diligence on unregulated introducers, as a matter of best practice. Their contractual documentation also made it clear that they could refuse to accept an application for membership for any reason and could refuse to execute investment instructions.
"This makes an argument that the requirement of due diligence which the ombudsman found to have been breached was novel, rather difficult."
This is an unrelated case to Carey v Adams, in which the Court of Appeal found Adams had been advised, in contravention of the Financial Services and Markets Act 2000, by CLP Brokers, an unregulated introducer.
Carey attempted to take this case to the Supreme Court in 2022 but was denied permission to appeal.
This latest case dates back to 2011, when Carey began accepting members from an unregulated introducer, Commercial Land and Property Brokers Sociedad based in Spain.
One customer was Mr Fletcher who transferred his pension to a Carey Sipp and invested in store pods which were said to have guaranteed returns and very little risk.
But the store pod investment failed and Fletcher lost his entire pension fund.
He complained to the Fos who found Carey failed to carry out due diligence on the unregulated introducer and investment.
The ombudsman said Carey should not have accepted Fletcher’s application to invest in the store pods and said “it ought to have concluded that it would not be consistent with its regulatory obligations, or best practice, to do so."
The court ruling agreed: "Furthermore, the due diligence and best practice with which the ombudsman was concerned was as to whether Mr Fletcher should have been accepted as a member of the Sipp at all. It pre-dated the contract. In relation to the store pod investment, the due diligence requirement did not require Carey to give advice as to the suitability of the investment. It is not in doubt that it was not authorised to do so. The due diligence related to whether the type of investment should have been accepted per se, in the light of all the circumstances, including the nature of the introducer."
