Leonardo Robinson in our SIPP and SSAS team comments on the key aspects of the Court of Appeal Judgment: 

It was hoped that this appeal case would provide some further clarity for the SIPP industry about the extent to which the client’s best interests rule in COBS 2.1.1R gave rise to various duties for SIPP providers when taking on new members.  In the event, this was not addressed at all.  In a judgment handed down on 1 April 2021, the Court of appeal decided that Mr Adams’ attempt to alter his arguments under COBS was an attempt to put forward a new claim and it was dismissed.

For the time being therefore, the decisions of the High Court on this aspect of the claim still stand. Our update on that decision is here: Russell Adams v Carey Pensions: What does it mean for SIPP operators? (burges-salmon.com). This issue may well be revisited by another case in the future. 

Mr Adams did win his appeal on the section 27 FSMA arguments.  The Court agreed that the introducer (CLP) had participated in more than merely introducing Mr Adams to the Carey Pension Scheme, having also encouraged Mr Adams to transfer out of a Friends Life policy and buy a Carey SIPP, both of which were regulated activities.  This enabled the conditions for section 27 to be satisfied, making the agreement unenforceable. Mr Adams is therefore entitled to a recover the money paid and compensation for any loss.

The Court has a discretion under section 28 of FSMA to allow the agreement to be enforced, but it chose not to exercise this in Options’ favour. It decided that the purpose of FSMA is consumer protection and the purpose of section 27 is to put the regulatory risk on the provider.  In particular, Options’ own failure to stop pipeline applications after it had terminated its relationship with CLP weighed against it. In reaching the decision the Court also took into account the number of clients Carey had taken on, the level of their investments and in all the circumstance there was reason for Carey to be concerned about CLP advising on investments. The consumer focus of the decision might not therefore play out in all cases, and it will depend on the specific circumstances.

By making this judgment, the Court has however made it clear to SIPP providers that they are on notice of risk in accepting introductions.  The implication is that providers must carry out careful due diligence on introducers who purport to refer business on an execution only basis.