In June 2020, the High Court ruled in favour of the FCA’s civil action against Avacade Limited and Alexandra Associates. This may mark the start of harsher action against unregulated companies making unsubstantiated claims when encouraging people to invest in SIPPs products.
Here’s more information about what happened.
Who are Avacade Limited and Alexandra Associates?
Avacade and Alexandra Associates operated as pension introducers. Essentially, this means they were paid by a pension provider to cold-call people; offering them a free ‘pension review’, then encouraging them to invest in a SIPP product.
This business model has since been made illegal, but unfortunately, the impact of their actions can still be felt by several customers who invested into a SIPP, then lost money as a result.
How bad is the situation for their customers?
According to the FCA, the two pension introducers made inaccurate claims to persuade people to invest in SIPPS; which in turn were invested in funds including property developments in Brazil, and rentable office space.
Over 2,000 people were convinced by Avacade and Alexandra Associates, and transferred around £91.8 million from their pension pots. The two firms made around £10.8 million in commission as a result of these pension transfers.
Since then, most of the underlying investments associated with the SIPPs have gone into liquidation, or failed.
A spokesperson for the FCA commented: “Unregulated introducers, like Avacade, often try to skirt regulation by making false claims about the kind of service they provide.”
Appealing the decision
After the High Court ruled in favour of the FCA, Zakery Khub (the solicitor firm representing two of the directors, Craig and Lee Lummis) stated that they were considering appealing the decision.
Omid Khub, managing director of Zakary Khub, stated that his clients sympathised with people who had lost money, but insisted that the pension introducers hadn’t acted outside the law.
“Our clients,” he stated, “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.”
What the future holds
Avacade went into creditor’s voluntary liquidation in 2015, though Alexandra Associates are still operating, under the name Avacade Future Solutions.
The FCA is currently trying to obtain an order from the High Court to prevent Alexandra Associates (along with the directors, the Lummis brothers and Raymond Fox) from engaging in unauthorised financial activities within the UK. They’ll also be trying to clarify how much money Alexandra Associates (and the directors) should pay out to compensate the customers affected by their actions.
Have you been mis-sold to?
If you were cold-called by a pension introducer, and you invested in a SIPP as a result, there’s a chance that you were mis-sold to. This type of practice is now illegal, and if your investment lost money, it’s likely you can make a claim.