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FCA wins legal battle against unregulated pension introducers Avacade

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How long does a pension complaint take? On the 29th June 2020 the High Court ruled in favour of the FCA in a civil action against the liquidised company, Avacade and its directors who provided pension services to consumers without FCA authorisation.

The FCA alleged the company provided a pension report service and made misleading statements which induced consumers to transfer their pensions into self-invested personal pensions (SIPPs) and then into alternative investments such as, tree plantations and overseas property developments.

More than 2,000 consumers transferred in the region of £91.8m from their pensions into SIPPs. Approximately £68m of that amount was invested in products promoted by Avacade. From these investments Avacade earned commissions in the region of £10.2m.

Many of the underlying investments have failed or are in liquidation. Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:

“The actions of those involved put the pension savings of thousands of people at risk. We will now seek restitution for them.”

The Court found that Avacade and activities were unlawful as they had engaged in the regulated activities of arranging and advising on investments, made unapproved financial promotions through their websites, promotional material and in telephone calls to consumers and made false or misleading statements.

What does this mean for the consumers?

This is an important case as it clarifies the responsibility of those unregulated introducers who claim to be “introducers” to Sipp operators. Avacade alleged that they just connected investors with Sipp administrators, and they did not “make arrangements”. This is a very important point as in the recent case of Adams v Carey Pensions: The Court found that the “mere introduction” to a SIPP Operator was not unlawful.

Now that the High Court has decided that Avacades’ actions went far further than “introducing” clients and were unlawful then SIPP Operators such as Liberty SIPP and Guinness Mahon can be held accountable for the actions of Avacade as they may be held vicariously liable for the actions of Avacade as the SIPP and investments were made through an unauthorised person.

It is good evidence that can be relied upon in the individual claims that have now been made to the FSCS as Liberty and Guinness Mahon have gone into liquidation that the SIPP Operator failed to carry out proper due diligence to be satisfied that Avacade were not acting unlawfully. Therefore, on that basis the High Court decision is very helpful for clients seeking redress through the FSCS.

We now know that a significant volume of business was conducted between Avacade and Liberty Sipp. Between 2011 and 2013, 1672 clients were referred to Liberty Sipp with 65% transfers from Occupational pension schemes.  The judgement in Avacade reflects the fact that the Avacade business model to flourish needed establishing and thereafter operating and administering a SIPP which did not receive advice on the suitability of a SIPP or the suitability of the investments to be made through the SIPP.



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