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Opinion piece on Adams v Carey Pensions Judgement

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Our very own Glyn Taylor explains why he thinks appealing the Carey Judgement will be unsuccessful and also what separates Carey from other SIPP cases.

By Glyn Taylor, Professional Support Lawyer.

In response to the latest article in the FT Adviser, where it states the FCA welcomes Mr Adam’s appeal, I am still of the view that whilst it is likely permission will be granted given the wider importance of the case within the SIPP industry, there are real difficulties with the Appeal being successful.

Whilst the point about the contract trumping FSMA, COBS and principles is in my opinion wrongly decided, the difficulty with the appeal is the contract only becomes important once Mr Adams becomes a client of Carey. It is common ground that a firm acting in an execution only capacity cannot advise or recommend on the transaction and COBS 9 is not engaged.

Understanding the differences  

The real issue here is understanding the difference between refusing to accept business and advising or recommending the suitability of the investment.

The distinction couldn’t be drawn on the Adams case as HHJ Dight found that when considering whether there has been a breach of COBS 2.1.1R it wasn’t pleaded and therefore didn’t have to determine the question of due diligence prior to the Defendant agreeing initially to accept the business.

Whilst he then goes on to say that had he been required to make a finding then he considered that Carey had carried out enough due diligence. This however is only obiter and not the reason why he dismissed the claim in relation to COBS 2.1.1R.

Why Section 27 has caught my concerns

It is with Section 27, that my real concerns become evident. Whilst an unregulated introducer giving advice or recommending an investment is a paradigm of Section 27 FSMA, the Claimant still has to show the arranging or recommending of the investment by the unregulated introducer, brought about the transaction.

We call this the causal test; the Claimant tried to argue the correct test is the ‘but for’ test, that is but for the actions of the unregulated introducer then the Claimant wouldn’t have brought about the investment. The Judge however decided on the evidence that the bare referral of a customer to a SIPP is insufficient to bring about the transaction as it does not necessarily result in any further causal steps being taken in the establishment of the SIPP.

Again, on the evidence there was a significant delay between setting up the SIPP, any further involvement of the introducer and the client signing a declaration to proceed with the investment.

Even if the but for test is correct, then the Claimants evidence was clear that he would have proceeded with the investment regardless and that he was very aware that the investment was high risk. This entitles the court to find that the agreement can be enforced under Section 28 if the Court of Appeal determine it was just and equitable to do so.

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