The High Court has found against two companies that convinced thousands of pension savers to move millions of pounds into several failed investments.
In a civil case, brought by the City watchdog, the High Court found that Avacade and Alexandra Associates (AA), trading as Avacade Future Solutions, had been unlawfully advising savers on how to invest and misled some customers.
Around 2,000 small investors moved £91.8 million from their regular pension pot into so-called self-invested personal pensions (Sipps), on advice from the companies.
About £68 million of that was then invested into schemes promoted by Avacade and AA, earning the firms £10.8 million in commissions, the Financial Conduct Authority said.
The FCA will now seek an order from the court to force the companies and the people involved in them to pay back some of the money as restitution.
It said that directors Craig Lummis, Lee Lummis and Raymond Fox had had run the companies that encouraged customers to ultimately invest in tree plantations, Brazilian property developments, and office space.
Many of the investments have failed or been put into liquidation.
“The actions of those involved put the pension savings of thousands of people at risk. We will now seek restitution for them,” said the FCA’s Mark Steward.
“Unregulated introducers, like Avacade, often try to skirt regulation by making false claims about the kind of service they provide. We urge consumers to avoid unregulated firms offering any kind of free pension review and only deal with firms which appear on the FCA register and who are permitted to provide pension advice.”
The FCA said: “The Court found that Avacade and AA’s activities were unlawful as they had engaged in the regulated activities of arranging and advising on investments, made unapproved financial promotions through their websites, promotional material and in telephone calls to consumers and made false or misleading statements.”
Mr Steward urged customers of the two firms who think they might have lost money to contact the FCA if they have not already spoken to the regulator.
Avacade entered liquidation in 2015.
Omid Khub of Zakery Khub Solicitors, who represented the defendants, said: “Our clients are extremely disappointed about today’s decision. However, they sympathise greatly with those who have lost money on any investments.
“Our clients operated as an introducer to a number of FCA regulated SIPP companies and IFAs. Those FCA regulated companies, (and not our clients), invested investors’ money only after approving the investments, and in some circumstances, only after advising upon those investments.”
The case is set to be tried in two parts, the second is yet to come.
Mr Khub added: “Our clients intend to appeal the first judgment in this case, before the second trial begins, to clarify the legal position by a senior court once and for all.”