Two pension “introducers” acted unlawfully and put thousands of people’s savings at risk, according to a High Court ruling in favour of the City watchdog over the transfer of £92m from pension schemes.
The judge ruled against two introducers which made misleading statements and offered unauthorised advice that encouraged savers to transfer their life savings into risky investments, such as tree plantations and Brazilian property developments.
More than £69m of the total amount invested is expected to have been lost after it was placed in investments that were promoted by the two groups, Avacade Future Solutions and Alexandra Associates, as well as their directors Craig Lummis, Lee Lummis and Raymond Fox.
A pension introducer is an unregulated marketing firm that is paid to introduce new clients to a pension provider or a set of investment. It typically contacts people via a cold call offering a free pension review. Cold calling on pensions has since been made illegal.
The Financial Conduct Authority won its case against the two introducers, after it accused them of unlawful activity. Although pension introducers do not come under financial regulation, the Court ruled that both firms had arranged and advised on investments, which are regulated activities.
The firms were also found to have made false or misleading statements and marketed unapproved financial promotions via their websites and telephone calls.
Mark Steward, of the FCA, said: “The actions of those involved put the pension savings of thousands of people at risk. We will now seek restitution for them.
"Unregulated introducers, like Avacade, often try to skirt regulation by making false claims about the kind of service they provide.”
Mr Steward urged savers to avoid unregulated firms offering any kind of free pension review and to deal only with firms on the FCA register which are permitted to provide pension advice.
More than 2,000 people transferred £91.8m from their pensions into self-invested personal pensions sold by Avacade and Alexandra Associates, according to the FCA.
Of that, £69m was invested in schemes unlawfully promoted by the firms, including £905,000 in a single fixed-rate bond relating to a Brazilian property development, marketed by Alexandra Associates.
The two companies had combined earnings of £10.8m from investments, most of which have since failed.
Avacade is no longer running as it entered into creditor’s voluntary liquidation in November 2015, meaning investors are unlikely to be reunited with their money.
However, the FCA said it would be asking the court to calculate the total amount owed by Alexandra Associates by “way of restitution for their roles in the unlawful activity”.
The watchdog is also seeking orders to ban the group and the individuals involved from engaging in unauthorised activities in the UK.
Glyn Taylor, of law firm APJ Solicitors, said he did not expect investors with either firm to see their money again. He said investors could seek compensation from their Sipp providers, which may be held “vicariously liable” after accepting business from the introducers and allowing customers to transfer their pensions into high-risk investments that failed.
Omid Khub, of Zakery Khub Solicitors, the legal representative of Alexandra Associates, Craig Lumis and Edward Lumis, said they were “extremely disappointed” with the ruling and intend to appeal.