SIPP Custody vs Advisory Due Diligence: Applying Adams v Options UK to Intermediary Disputes

Two defendants, one failed asset

High-risk or unregulated investments held in a SIPP produce complaints that name everyone: the introducer, the adviser and the operator. Joint and several language in the letter is not joint and several liability. Each firm is answered on its own permission and its own file.

In Adams v Options UK Personal Pensions LLP [2021] EWCA Civ 474 the Court of Appeal held that an operator cannot contract out of section 27 of FSMA or its own regulatory duties by calling the arrangement execution-only. That is a decision about the trustee’s gatekeeping. It is not a decision that the adviser’s suitability file and the operator’s due diligence file are interchangeable.

The line between the files

The adviser

Where there was a personal recommendation, COBS 9 or COBS 9A requires a look-through to the asset, not merely to the SIPP wrapper. The question is whether that asset was suitable for that client. An execution-only instruction, properly documented, is a different case and has to be proved as one.

The operator

Principle 2 and SYSC ask whether the operator accepted an asset it should have refused, and whether the distribution channel was one it should have closed. Adams is relevant here. It does not transfer the operator’s acceptance decision onto the adviser, or the adviser’s recommendation onto the operator.

The provenance

The defence audits where the asset came from: the promoter, the introducer, the date it was admitted to the trustee’s list, and what each firm was told. Published Ombudsman decisions on the same asset are the benchmark for how those roles have been split in practice. A firm that answers as if it played the other firm’s role will be held to that role.

Summary

Adams raised the operator’s duty. It did not erase the adviser’s. An intermediary dispute is defended by showing which firm did which job, against the Ombudsman decisions on that asset.