In a widely anticipated judgement, the High Court has dismissed Russell Adams’ claim against Carey Pensions Limited (Carey Pensions) in its entirety.

The case considered whether a SIPP provider operating on an “execution-only” basis is liable to its members for losses suffered as a result of entering into an unsuitable underlying investment.

This article sets out the key points of the judgment together with the wider implications of the judgment for SIPP providers.


In 2012 Mr Adams responded to an advertisement by an unregulated introducer (CLP) which offered the opportunity to release cash from his pension. CLP advised Mr Adams that all the funds within his pension should be reinvested in storage facilities, described as “store pods”, at a site operated by a company called Store First Blackburn Limited (Store First).

The investment was to be held in a SIPP provided and operated by Carey Pensions. As part of the application to open a SIPP, Mr Adams was provided with a suite of documents, including declarations acknowledging that:

  • (i) he was entering into a high risk, speculative investment;
  • (ii) he had obtained his own financial, investment and tax advice; and
  • (iii) he had not received any inducements for his investment in the store pods.

Mr Adams also confirmed that he was solely responsible for decisions relating to the purchase, retention or sale of any investments held within the SIPP. Carey Pensions was to act on Mr Adams’ instructions to set up the SIPP but would not provide advice on or be responsible for the suitability of the SIPP or the investments held within the SIPP.

Carey Pensions’ relationship with CLP was governed by Carey Pensions’ terms of business. As part of its due diligence on CLP, Carey Pensions had investigated the store pod leases and concluded that they were legitimate investments capable of being held in a SIPP pursuant to HMRC guidelines.

Mr Adams instructed Carey Pensions to make the investment in Store First. The investment failed to perform as hoped and the value of Mr Adams’ investment depreciated significantly over time.

The claim

Mr Adams brought proceedings against Carey Pensions, seeking damages and to unwind his contract with Carey Pensions. Mr Adams claimed that Carey Pensions had breached FCA rules mandating it to act honestly, fairly and professionally in accordance with the best interests of its client (referred to as the “best interests” rule).

Mr Adams argued that the best interests rule required Carey Pensions to put in place systems and controls to (i) ensure that unsuitable investments introduced by unsuitable introducers like CLP are not placed within a SIPP; and (ii) enable it to identify possible instances of financial crime and consumer detriment such as unsuitable SIPPs. Mr Adams also claimed that Carey Pensions’ obligation to act in his best interests included considering whether the underlying investment was a suitable investment for him.

The court found that in determining the scope of Carey’s obligations under FCA rules, and in construing those obligations, the correct starting point is a consideration of the contract between the parties. A fundamental aspect of the contract between Carey Pensions and Mr Adams was that Carey Pensions would only act on an execution-only basis and Mr Adams was to be responsible for his own investment decisions.

Carey Pensions’ obligations must therefore be read in this context and cannot be construed as imposing an obligation to advise Mr Adams on suitability of the SIPP or the investment. Carey Pensions was under no duty to go beyond the scope of its contract with Mr Adams and consider the suitability or appropriateness of the SIPP or of the underlying investment.

The court also noted that Carey Pensions’ procedures relating to the use unregulated introducers had been the subject of a visit by the then Financial Services Authority (FSA). The findings of that visit demonstrated that the FSA were fully aware that unregulated brokers, recommending underlying investments, were introducing investors to Carey Pensions for the purpose of establishing a SIPP on an execution-only basis.

The judge therefore rejected the argument that Carey Pensions should have taken any action to prevent introductions by CLP (beyond the action it took to terminate the relationship). He noted that the FSA had been satisfied with Carey's procedures following its visit, and had the FSA formed the view that the use of unregulated introducers was in breach of Carey Pensions’ duties and obligations, this would have been noted at the time.

In addition, Mr Adams admitted that, contrary to his declaration, he had received an inducement of around £4,000 from CLP in return for entering into the underlying investment. He also confirmed that he was motivated by this inducement and as such would still have made the investment even if he had obtained financial advice.

The court therefore held that Carey Pensions had complied with the best interest rule on the basis that Mr Adams had been warned that the underlying investment was high risk and speculative, understood Carey Pensions’ limited role in the transaction, and subsequently agreed to enter into the SIPP anyway.

My Adams also claimed that (i) Carey Pensions was in breach of the regulatory regime in establishing the SIPP; and (ii) CLP had provided negligent investment advice for which Carey Pensions is liable. The judge dismissed both claims, and thereby dismissed the case against Carey Pensions on all grounds.

Wider implications for SIPP providers

This judgment provides welcome clarity around execution-only relationships, and clearly sets out SIPP providers’ obligations with respect to the actions of unregulated introducers. The industry view that SIPP providers operating on an “execution-only” basis should not be responsible for members’ investment decisions has now been upheld in court, with definitive ruling confirming that Carey Pensions’ responsibility was limited to the SIPP itself and did not extend beyond ensuring the underlying investment complied with HMRC guidance.

SIPP providers should note however that a key factor in the court’s decision was the presence of an inducement, which would have motivated Mr Adams to proceed with the SIPP regardless of the high risk and speculative nature of the underlying investment. Other members (and particularly vulnerable customers) may not be driven by the same motivating factor and may therefore be more likely to succeed in making a case that they did not understand the nature of the underlying investments.

The courts also took care to highlight the differences between this case and the Berkeley Burke decision (Berkeley Burke SIPP Administration Ltd v Financial Ombudsman Services Ltd [2018]). In particular, the court stressed that Berkeley Burke was concerned with an investment into a fraudulent scam and the key point at issue was whether sufficient due diligence had been carried out by the SIPP provider. In contrast, the investment in Store First was genuine, and the judge considered that Carey Pensions had undertaken appropriate due diligence into Store First before allowing members to hold the investments in their SIPP. Future cases may therefore rest on the distinction between a genuine “SIPP-able” investment which failed to perform as hoped and a fraudulent scam, as well as on the efficacy of SIPP providers’ due diligence measures.

Whilst this judgement and its conclusions are no doubt positive for the industry, SIPP providers should remain mindful of the specific circumstances giving rise to this judgment and seek to emulate the elements of good practice identified in Carey Pensions’ business model. 

In particular, SIPP providers should:

  • (i) ensure that all documentation (including agreements and any supporting documents or marketing materials) clearly state the role and responsibilities of the firm, the member and any intermediaries;
  • (ii) ensure that full, detailed and ongoing due diligence is undertaken in relation to non-standard assets and all measures taken are properly documented; and
  • (iii) consider the role played by unauthorised intermediaries in the firm’s business model and ensure that there are proper systems and controls in place to manage the use of unauthorised intermediaries (including reviewing any agreements in place).

This judgment should also be read in light of other decisions which have a contrary outcome, particularly those complaints which have been upheld by the Financial Ombudsman Service.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions

Date published

10 June 2020


View all