Investor Blaming Pension For Execution Only Loses Case

A claim against a Self Invested Personal Pension provider had its final ruling in court yesterday (18^th May).

In March 2018 a 'lorry driver' (name withheld in this story) made a claim against the SIPP company for loss of value on an investment held inside a Self-invested personal pension (SIPP).

Originally, back in 2012 the client invested £50,000 into some unregulated investments within the EU.  Over the following years the funds reduced to almost being worthless or no value.  The clamaint and his lawyers accused the SIPP provider of allegedly mis-selling him a SIPP and using a Spanish based unregulated introducer to facilitate the investment.

The clamiant's legal team said: “the pension administrator breached Financial Conduct Authority (FCA) COBS (Conduct of Business Sourcebook) rules that state a firm must act in their clients interest and would not of given business to this sort of high-risk speculative type of investment”.

The defence was that allegedly, the client wanted an execution only investment i.e. no advice was sought from an adviser or given by the SIPP provider.

The SIPP provider said: “They had warned [client] about the high-risk investment, but he chose to proceed as there was a £4,000 inducement from the introducer, which [the SIPP provider] reported to HMRC”.

The Judge ruled there was no evidence that the SIPP provider was responsible for checking the validity of an investment or be held to account if a client instructs them to invest on an execution only basis.

Comment

Execution only is a very grey world! 

Whilst we cannot comment on the case, we can mention that a number of years ago we tried to help a client who had been encouraged to transfer to another SIPP (not connected with the above case) and then allegedly invested in a "Port Development" in Spain, with railway, dock yards et al to be built.  Yet another unregulated investment and this time, whilst allegedly no advice was given by the old adviser (now closed), the old adviser had a connection with the firm promoting the "Port Development" and alas the client lost all their money.  It was claimed to be execution only i.e. the client, in our opinion, an extremely inexperienced investor, and just a normal factory worker, had approached the SIPP firm "out of the blue" having found this fantastic investment opportunity on his own in a coastal Spanish town.  Needless to say, the adviser was bankrupt but we managed to get compensation from the Financial Services Compensation Scheme as we could prove a loose link between the former, now bankrupt adviser and the Spanish promotions company for the Port development (where works never started!).

We believe the FCA should make all SIPP managers accountable when they accept an unregulated investment and only allow sophisticated investors (that they have qualified as such) to invest in unregulated, unprotected investments.