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On 18 May 2020, the Chancery Division handed down judgment in Russell Adams v Options SIPP UK LLP (originally known as Adams v Carey), a landmark test case on the potential liability of an execution-only SIPP provider (D) to an investor (C) whose underlying investment in the SIPP sustained significant losses. The Court held that D was not liable for such losses.

C’s claim had been advanced on, among others, the following grounds: (1) the FCA’s Conduct of Business Sourcebook (“COBS”) Rules imposed an obligation (COBS 2.1.1) on D to act “honestly, fairly and professionally in accordance with the best interests its client”, that this required D to advise in relation to the underlying investment in the SIPP, and that there had been a breach of this duty (“the COBS claim”); and (2) s.27 of FSMA permitted C to have the contract with D declared “unenforceable” on the basis that the unregulated introducing broker was in breach of s.19 of FSMA in arranging and/or advising on investments within the meaning of arts 25 and 53 of the RAO (“the s.27 claim”).

The Court rejected each claim. 

On the COBS claim, the Court concluded that (1) in order to identify the extent of any duty imposed on a SIPP provider by COBS 2.1.1, one has to consider the underlying contract between the parties which defined their roles and functions; and (2) the contract made clear that the D did not owe any duty to advise on the underlying investment. 

On the s.27 claim, the Court concluded that an unregulated introducing broker was not arranging and/or advising on investments within the meaning of arts 25 and 53 of RAO.

A copy of the judgment can be found here.

Andrew Green QC acted for the Defendant.

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