Long-running legal battle over unregulated investments approaches judgment day
The fierce and long-running legal battle to define the responsibilities of Sipp providers in relation to unregulated investments has entered its final phase.
Rulings from two court cases, the latest of which finished last week, are expected to clarify these duties and have wide implications for the industry when they emerge.
The stakes are high for all parties involved, including the FCA, which has submitted evidence to both cases, raising questions over whether Sipp providers breached its conduct rules by accepting esoteric investments without due diligence.
The first case is a judicial review into a long-standing dispute between Berkeley Burke Sipp Administration and the Financial Ombudsman Service, which Money Marketing covered extensively from court last week. It goes back to 2014, when the FOS ruled against Berkeley Burke for failing to carry out adequate due diligence on a £29,000 unregulated collective investment scheme for a client called Mr Charlton.
In 2011, Mr Charlton invested his money into plots of agricultural land in Cambodia via a Berkeley Burke Sipp. In February 2017, the FOS stood by its initial ruling after an appeal, but Berkeley Burke decided to challenge the decision again. In October 2017, the High Court struck down Berkeley Burke’s second challenge and a question remained over whether the firm would pursue a judicial review to appeal the decision for a third time.
That is what happened, and the judicial review of the FOS decision against the provider is expected to have wide-ranging implications, as it could establish with greater certainty whether Sipp providers have a duty of care to vet unregulated investments for their clients.
The second case, with similar stakes for those involved, concerns Carey Pensions, which claimed it did not break conduct-of-business rules when it set up a Sipp for a client, as it entered a High Court hearing in March. In this case, lorry driver Russell Adams alleges Carey Pensions missold him a Sipp in February 2012, when he was paid an inducement of £4,000 into his savings account to encourage him to put money into rental scheme Store First. He subsequently transferred £50,000 into a Store First investment on 12 June 2012 before the scheme hit troubles.
Money Marketing takes a deeper look at the arguments involved, and the potential outcomes for the FCA and Sipp providers when the rulings are published in the near future.