TIDMSTM
RNS Number : 3161U
STM Group PLC
01 April 2021
STM Group Plc
("STM", "the Company" or "the Group")
Appeal Judgment in Adams v Carey case
STM Group Plc (AIM: STM), the cross-border financial services
provider, announces the outcome of the appeal judgment in the
long-standing Adams v Carey case. The original case was heard in
March 2018.
The High Court found at first instance wholly in favour of Carey
Pensions LLP ("Carey"), with Mr Adams' claims against Carey being
dismissed on all grounds. However, the Court of Appeal granted Mr
Adams permission to appeal. The appeal was heard remotely by
video-conferencing between 2 and 4 March 2021.
The key facts/background to the case are as follows:
-- Mr Adams was introduced to Carey by an unregulated introducer.
-- Mr Adams transferred funds from an existing personal pension
into a Self-Invested Personal Pension ("SIPP") administered by
Carey.
-- Mr Adams instructed Carey to purchase, via his SIPP, a number
of storage units from Store First.
-- Carey is a pensions administrator which does not provide
advice, or hold permissions to provide advice, and therefore
carried out the transaction on an execution-only basis as
instructed.
-- Mr Adams' investment in Store First did not perform as he had
expected, which resulted in Mr Adams bringing a claim against Carey
seeking damages.
Mr Adams' appeal concerned primarily two causes of action (with
the allegations that Carey was a joint tortfeasor, which was
unsuccessful at first instance, being dropped before the appeal).
Mr Adams alleged:
1) that under the FCA's Conduct of Business Sourcebook rules
(COBS) 2.1.1, Carey had failed to act fairly, honestly and in
accordance with the best interests of its client; and
2) that, given the unregulated introducer 'advised' Mr Adams to
purchase the investment, transfer his pension and establish the
SIPP, and the introducer 'arranged' the underlying investment,
without the necessary permissions and therefore in breach of the
general prohibition under s.19 of FSMA, that under section 27 of
the Financial Services and Markets Act 2000, Mr Adams' agreement
with Carey should be unwound, and Carey should provide relief to Mr
Adams.
The judgment by the Court of Appeal was handed down this morning
(the "Judgement").
The Judgement dismissed Mr Adams' appeal in the COBS claim -
such that the initial judgment in Carey's favour at first instance
remains, but upheld Mr Adams' appeal in the section 27 FSMA claim.
Given the judgment upheld the section 27 claim, it was necessary
for the Court to consider section 28, which effectively operates as
a defence to section 27. The Court of Appeal disagreed with the
initial judgment that found that even if section 27 had applied
that the Court would have exercised its discretion under section
28, such that the transactions would stand. Instead, the Court of
Appeal ordered the transactions to be unwound with Carey to
compensate Mr Adams accordingly. The level of that compensation is
to be determined by the Court following a further separate
hearing.
Carey, through its lawyers, have requested permission from the
Court of Appeal to appeal the Judgment. This request was denied, as
is commonly the case when seeking permission to appeal directly
from the Court of Appeal. Carey and its lawyers, as well as the
Professional Indemnity ("PI") insurers and their advisers, will now
consider the merits of seeking formal permission to appeal from the
Supreme Court.
At the time of acquiring Carey pensions in February 2019, STM
announced that it "noted that Carey Pensions was party to a high
profile Court case (the 'Adams' case). STM has secured indemnities
and the benefit of significant existing PI cover from the sellers
and considers any residual exposure to this and any other historic
industry issues, to be minimal". The appeal judgment does not
change that position, with any cost excesses of the policy having
previously been expensed within the normal course of business.
A concise summary of the Court of Appeal judgment, prepared by
Eversheds Sutherland, who acted as the lawyers for Carey, can be
found at -
https://www.eversheds-sutherland.com/global/en/what/articles/index.page?ArticleID=en/Financial-services-and-dispute-investigation/A_swift_judgment_in_the_appeal_in_Adams_Options_UK_Personal_Pensions_LLP
.
Alan Kentish, Chief Executive of STM Group Plc, commented:
" Clearly the overall Judgment is disappointing from our point
of view, but it has helped to provide clarity in relation to our
undertakings and obligations to COBS and, in particular, that the
scope of COBS must be considered through the lens of the individual
contractual arrangements with customers. This remains welcome
guidance for both STM as well as the SIPP and more general
Financial Services industry as a whole.
"The context of interpretation of section 27, and arguably the
limitations given to section 28 of FSMA by the Court of Appeal will
have far-reaching implications as to how financial services
providers will interact with introducers and consumers in the
future. It appears that this marks a shift of emphasis on consumer
protection, such that individuals are not accountable for their own
actions, and this may well limit market choice and competitiveness,
and could be seen as a significant point of public interest.
"We believe that our Options SIPP business is well insulated
with extensive insurance protection. Carey will now need to sit
with its advisers to consider what next steps to take whilst
clearly abiding by the terms of the Order."
Christine Hallett, Managing Director of Carey (now rebranded as
'Options, for your tomorrow'), added:
"We are disappointed to have received this Judgment in relation
to Section 27, and even more so that the various factors in Carey's
favour - the rigorous framework that Carey had put in place, and
which was specifically highlighted by the judge at first instance,
that Carey was not aware that the unregulated introducer was acting
in breach of the general prohibition and terminated its
relationship when it did become aware, and Mr Adams' contribution
to his own loss - were not sufficient for the Court of Appeal to
exercise its discretion under Section 28.
"Whilst the findings of Section 27 will always relate to fact
specific scenarios, in the context of the SIPP provider environment
generally, as well as the wider UK Financial Services industry, any
clarity and additional guidance is welcome and needed. Mr Adams
brought a novel claim under s.27 FSMA, in respect of which there
was no existing case law, and which failed at first instance.
Invariably all UK regulated businesses will need to consider their
procedures and policies, and the potential implications of dealing
with any unregulated third-party that could be deemed to be caught
in what is under the judgment, the very broad and encompassing acts
of "making arrangements" and "advising".
"Importantly, and as expected, the Court of Appeal upheld the
judgment of first instance that Carey had met its obligations under
the Conduct of Business principles (COBS 2.1.1). This means that
HHJ Dight's approach to determining the scope of COBS rules remains
good law."
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
For further information, please contact:
STM Group Plc
Alan Kentish, Chief Executive Officer Via Walbrook PR
Therese Neish, Chief Financial Officer www.stmgroupplc.com
FinnCap www.finncap.com
Matt Goode / Emily Watts - Corporate Finance Tel: +44 (0) 20 7220
Tim Redfern / Richard Chambers - ECM 0500
Walbrook www.walbrookpr.com
Tom Cooper / Paul Vann Tel: +44 (0) 20 7933
8780
Mob: +44 (0) 797 122
1972
STM@walbrookpr.com
Notes to editors:
STM is a multi-jurisdictional financial services group which is
listed on the AIM Market of the London Stock Exchange. The Group
specialises in the delivery of a wide range of financial service
products to professional intermediaries and the administration of
assets for international clients in relation to retirement, estate
and succession planning and wealth structuring.
Today, STM has operations in UK, Gibraltar, Malta, Jersey and
Spain. The Group is looking to expand through the development of
additional products and services that its ever more sophisticated
clients demand. STM has developed a specialist international
pensions division which specialises in SIPPs, Qualifying Recognised
Overseas Pension Schemes (QROPS), Qualifying non UK Pension Schemes
(QNUPS). STM has two Gibraltar life assurance companies which
provide life insurance bonds - wrappers in which a variety of
investments, including investment funds, can be held.
Further information on STM Group can be found at
www.stmgroupplc.com
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