A Court of Appeal challenge submitted by unregulated introducer firm Alexandra Associates begun on 7 July which aims to overturn a previous Financial Conduct Authority (FCA) legal victory over the firm.
The appeal, submitted in July last year, was put forward after the High Court ruled in favour of the FCA in a civil action against Avacade and Alexandra Associates after pension savers were persuaded to invest millions of pounds into risky, unregulated schemes.
The FCA alleged the two companies provided a pension report service and made misleading statements that induced customers to transfer their pensions into self-invested personal pensions (SIPPs) and then to alternative investments, such as tree plantations and Brazilian property developments.
We hope the Court of Appeal will clarify the hard-fought regulatory issues in this case."
At the time, the High Court found Avacade's and Alexandra Associates' activities were unlawful as they had engaged in regulated activities, made unapproved financial promotions through their websites' promotional material and in telephone calls to consumers, and made false or misleading statements.
Speaking on behalf of Alexandra Associates' Craig Lummis and Lee Lummis, Omid Khub of Zachary Khub Solicitiors today said: "The Court of Appeal, headed by Sir Geoffrey Vos, the Master of the Rolls, together with Lord Justice Peter Jackson and Lord Justice Popplewell, will hear our clients' much-anticipated grounds of appeal this morning, over two days.
"We hope the Court of Appeal will clarify the hard-fought regulatory issues in this case which arise out of the application of the Financial Services and Markets Act 2000."
More than 2,000 customers transferred about £91.8m into products promoted by Avacade and about £905,000 into products promoted by Alexandra Associates. From the investments, the two firms earned commissions in the region of £10.8m. Many of the underlying investments have failed or are in liquidation.
Khub said: "It has always been the case that our clients', as introducers, ought not to have been singled out and be held solely responsible for the losses alleged to have been suffered by investors, and that the FCA ought to have also brought legal action against the regulated SIPP companies and IFAs who placed the investor in those investments."
He said the FCA has never given a "satisfactory explanation" for its "unfair refusal" to include those companies involved in these court proceedings. "Our clients have always maintained that they introduced the UK consumer to FCA regulated IFAs and FCA regulated SIPP providers to advise the UK consumer independently and to apply their own discretion to any investment decision."
Carey Pensions ruling
Khub also referred to the latest Carey Pensions ruling, whereby the Court of Appeal voted in favour of Russell Adams, arguing that it provides a different interpretation of regulated transactions to that of the High Court judgement in Avacade.
"This ruling (unless overturned by the Supreme Court), provides unquestionable support for our legal arguments, and accordingly, we have sought additional grounds for appeal, in addition to those which Lady Justice Asplin, sitting as a single Judge of the Court of Appeal, granted to our client in December 2020.
"In essence, on any view, the analysis of Adams (as an authority) makes it clear that it is not a regulated activity under the RAO to buy a tree in a SIPP," he said. "This is why we say that the legal authorities set in these two cases has a far-reaching implication for the financial industry, i.e. those who introduce consumers to the IFAs, SIPP providers and the consumers alike.
"We anticipate further clarification in this area of law from this heavyweight panel of judges, specifically for the protection of the consumer and financial firms alike."
First published by our sister title Professional Adviser