FCA: Regulations trump contract law for Sipp duties

Bizar Male

FCA lawyers have argued that regulations trump contract law when it comes to Sipp provider duties to vet unregulated investments.

In the third day of an intense court appeal battle to determine whether a landmark Sipp ruling was right, the regulator’s representatives suggested a Sipp provider ought to know if it is getting a business from an unregulated introducer.

The watchdog was giving evidence today, as part of the appeal hearing, in which a former client of Options UK Personal Pensions LLP, previously known as Carey Pensions UK, challenges the decision that the provider was not responsible for the investment losses he suffered.

Back in September the Court of Appeal granted Russell Adams permission to challenge the ruling which went in Options’ favour in May 2020.

Adams lost money by investing in storage pods that reduced significantly in value afterwards, the court case heard.

The long-awaited verdict said the Sipp provider was not responsible for the investment losses Adams suffered.

QCs for both parties have been engaged in a fierce legal battle to define where the regulated and unregulated boundary is in this appeal case.

Legal representation for Adams said Options breached duties and should be on the hook for his investment losses.

Those representing Options contend it was not at fault, as Adams knew he was making a high-risk investment into storage pods.

The FCA was present in the Options appeal and represented by QC Nicholas Vineall who submitted the watchdog’s arguments.

He said: “The FCA rules say where a regulated entity receives business from unregulated entity and that action passes beyond the perimeter, then the risk passes to the regulated business.

“The hope is that this induces a self-policing policy and it is at the heart of FCA rules. If the rules put the onus on the provider then why should it matter if it knows there is a breach or not?

“A notional Sipp provider ought to know if it is getting a business from an unregulated introducer as there is a risk that could involve [the unregulated entity] crossing the perimeter [thereby transferring risk onto regulated entity]. It is not a good enough excuse for the notional Sipp provider to say it had not considered that a possibility.”

He added:The nature of Sipp providers’ duties and how they treat customers is an important issue. The question of Sipp providers’ duties is an issue and we would suggest it is appropriate for court to rule on these duties. The authorities [FCA] think it would be helpful the more the court said the better.”

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