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Pensions Ombudsman: John Brian Richardson v Carey Pensions

July 2016

rustees’ limited due diligence in relation to unregulated investments can be permitted in certain circumstances.

Pensions Ombudsman (PO-6006, 15 March 2016): John Brian Richardson v Carey Pensions UK LLP and Carey Pensions Trustees Limited (“Carey Pensions”)
Case Background

Throughout May and June 2012 Mr Richardson had met with and spoken with a company called In4orm who suggested Mr Richardson establish a SIPP and invest in GOP an unregulated collective investment scheme (“UCIS”).

In a letter from In4orm to Mr Richardson they made clear the choice of investments was entirely Mr Richardson’s and if he wanted advice this would come from the SIPP provider. It also confirmed the investment was not regulated by the FSA nor was it covered by the Financial Services Compensation Scheme.

Mr Richardson says he was persuaded not to take additional advice from the SIPP provider both by In4orm and the fact there was an additional fee of ÂŁ1,000 payable for it.

On 10 July 2012 Mr Richardson applied to establish the SIPP with Carey Pensions. The application form stated it was for direct clients acting without finance advice.

Further, on the member instruction and declaration form (signed by Mr Richardson 1 October 2012), it stated Mr Richardson had not been provided with advice from Carey Pensions nor Carey Pension Trustees UK Ltd and he understood the investment was considered high risk and speculative.

SIPP rule 7 provided that the Scheme Administrator has investment powers which included “any other form of collective investment” and would be exercised “only in accordance with any directions give by the relevant member…”. Carey Pensions therefore complied with Mr Richardson’s request.

Unfortunately in 2013 the UCIS went into administration and therefore Mr Richardson believed he had lost his investment.

Mr Richardson subsequently made a complaint to the Pensions Ombudsman (“PO”). He alleged he was a complete novice regarding pensions and that Carey Pensions should have verified his requirements and warned him of the risks; by not having done so, they failed both in their duty to him and in their duty to carry out proper due diligence.
The Determination

The PO considered whether Carey Pensions had carried out appropriate due diligence and whether it was maladministration to have made the asset available within the SIPP. In considering this, the PO considered Carey Pension’s legal obligations and whether they acted consistently with good industry practice.

The PO dismissed the complaint, determining that Carey Pensions, as the administrator, and Carey Pensions Trustees Limited, as the trustee, were not obliged to carry out the level of due diligence suggested by Mr Richardson.
Lessons Learnt

The PO dismissed the complaint on the following grounds:

    Mr Richardson’s submissions had largely placed Carey Pensions in an adviser role, however this was not their role and the documentation Mr Richardson signed acknowledged this.
    Although there is no exemption from the statutory duty of care owed by trustees for SIPPs, it can be excluded or modified by the terms of the trust. As the decision regarding selection of investments was clearly stated as the member’s decision, the statutory duty was considered not to apply.
    Carey Pensions had acted in accordance with the Scheme rules.
    As an administrator, Carey Pensions only had to consider whether or not an investment fell within the list permitted by HMRC.
    The basic checks Carey Pensions undertook were sufficient to meet the regulator’s and HMRC’s requirements for such investments at the time.

Although the FCA have since provided several reviews which increase the level of due diligence required by SIPP operators, these had not been issued at the time of Mr Richardson’s investment so could not applied to a past situation. It is therefore possible that a future complaint on similar grounding could succeed.

If you would like any further information, please do not hesitate to contact Symon Rowley.

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