Illegal pension introducers ordered to repay £10.7m

The High Court has ordered two companies and three individuals to pay a total of £10.7m in restitution to individuals who were illegally induced to transfer their pensions into self-invested personal pensions (SIPPs), following action by the Financial Conduct Authority (FCA)

The order was made against Avacade Ltd (in liquidation), Alexandra Associates (UK) Ltd trading as Avacade Future Solutions (AA), Craig Lummis, Lee Lummis and Raymond Fox.

The Court found that Avacade’s 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.

The Court also found that the Lummises and Fox were knowingly concerned in Avacade’s and AA’s breaches.

The FCA alleged the two companies provided a pension report service and made misleading statements which induced consumers to transfer their pensions into SIPPs and then into alternative investments such as HotPods (office space available for rent), tree plantations and Brazilian property developments.

More than 2,000 individuals transferred in the region of £91.8m from their pensions into SIPPs. Approximately £68m of that amount was invested in products promoted by Avacade and approximately £905,000 was invested into a product promoted by AA – the Paraiba bond – a fixed rate bond relating to a Brazilian property development. From these investments Avacade and AA earned commissions in the region of £10.8m.

Many of the underlying investments failed or are in liquidation.

As a result of the High Court ruling, Avacade has been ordered to pay £10m, and AA £715,000. Craig and Lee Lummis have each been ordered to pay £2.5m, while Fox was ordered to pay £1.7m.

However, the total which the FCA can recover for the moment has been limited to £10.7m pending a possible second trial which will consider the issue of restitution in more detail.

Additionally, AA, the Lummises and Fox have been banned from engaging in regulated activities in the UK without authorisation, making financial promotions and making false or misleading statements about regulated investments.

Mark Steward, the FCA's executive director of enforcement and market oversight said: ‘The FCA will make wrongdoers financially accountable to consumers whom, as the Court recognises in this decision, “…include elderly and vulnerable citizens who have paid their due share of income tax, made sacrifices, and taken prudential decisions for their future retirement over the course of an honest working life"’. 

Subject to any appeals against the judgment, the FCA says it will take steps to recover monies from the defendants, so that it can return them to the investors. Any Avacade/AA customers who believe they may have lost money and have not previously been contacted by the FCA about this matter, should contact the FCA to provide their details.

Omid Khub of Zakery Khub Solicitors, the law firm representing the Lummises and Alexandra Associates, put out a statement which said: 'Our clients are pleased the court has recognised the need for the second trial.

'While our clients sympathise with any consumer who has suffered a loss, they insist that the second trial is necessary to show that they did not cause the loss alleged by the FCA.

'Our clients are now focused on the appeal and we can confirm that our clients’ Notice of Appeal (on at least 28 grounds) has been filed with the Court of Appeal.

'For the avoidance of doubt the judgment of the 31 July 2020 is also subject to appeal and our clients’ are currently reviewing the judgment.'   

The Financial Conduct Authority and Avacade Ltd in liquidation, Alexandra Associates (UK) Ltd, Craig Lummis, Lee Lummis, Raymond Fox, is here

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