The pensions industry has long-since been a staple focus of financial regulation. With pensions forming a pillar of many individuals’ financial portfolio, advice on how to navigate the process is prevalent. The quality of such advice, however, tends to vary depending on the advisory institution selected by the consumer. The Financial Conduct Authority brought this consideration to light in Financial Conduct Authority v Avacade Ltd (in linquidation) and Others (2020) EWHC 1673 (Ch).

The primary defendant, Avacade Ltd (“Avacade”), was accused of committing three litigious acts: making false claims to clients, delivering regulated services without permission, and presenting financial promotions without relevant permission. Adam Johnson QC, Deputy Judge of the High Court, found in the claimant’s favour on each count.

Avacade’s strategy was seemingly benign on the surface. Pension schemes members with already established pensions were cold-called and offered advice on alternative investment options. As the business-client relationship grew, Avacade would routinely advise members to invest in self-invested personal pensions (SIIPs). The business would then refer its clients to an independent financial advisor. Avacade’s advice was, however, unfounded. A significant proportion of assets placed into SIPPs at the direction of Avacade are currently in liquidation. This has resulted in many members' pensions bleeding in value at rapid rates.

The FCA has sought restitution as well as court orders prohibiting Avacade from providing authorised services within the United Kingdom. Considering Avacade made commissions close surrounding the figure of £11m, the restitution sought is seemingly of notable size. It is accordingly unsurprising that the United Kingdom’s foremost financial regulator has cracked down on a scheme of such magnitude.

The broader economic significance of pensions perhaps explains the FCA’s justifiable laser-focus on the pensions industry. With the public importance of pensions plans in creating incentives for employment and, accordingly, growth in GDP, it is imperative that the FCA maintains the integrity of the advisory sector to ensure reliability within the process of managing a pensions fund. Pensions are, for many individuals, a comforting source of financial security. With the FCA cracking down on those who undermine such security, the integrity of the advisory sector is only further reinforced.

by Brighton Dube

The FCA Litigates an Unregulated Pensions Advisor