Two UK companies that persuaded thousands of pension savers to invest their retirement cash in risky, unregulated schemes have been ordered to pay a record £10.7m to people who lost out.

Avacade Limited, of Manchester, and Cheshire-based Alexandra Associates (AA), which had traded as Avacade Future Solutions, provided pension investment services without being authorised to do so by the Financial Conduct Authority.

The financial regulator said the High Court had ordered the two companies, and three of their directors, to pay £10.7m in restitution to retirees who were “induced” to transfer their pensions into self investment personal pension (Sipps) plans between 2010 and 2013.

The action was the first of its kind taken by the FCA against unauthorised “pension introducers” for breaches of its rules.

“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,” said Mark Steward, the FCA's executive director of enforcement and market oversight.

In a judgment dated June 30 2020, 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 and issued false or misleading statements.

The court found Craig Lummis and his son Lee Lummis, directors of both companies, and Raymond Fox, a director of Avacade Limited, which is now in liquidation, were “knowingly concerned in” the breaches.

It ordered Avacade to pay up to £10m, AA £715,000, Craig and Lee Lummis £2.5m each and Raymond Fox £1.7m. However, it added that the FCA could not recover any sum greater than £10.7m.

Avacade’s activities led to 1,943 investors transferring about £87m of pension funds into Sipps, according to the court judgment. Of that, £68m was placed into investment products from which Avacade received commissions and fees totalling £10.6m.

AA's activities led to at least 59 investors transferring roughly £4.8m of pension cash into Sipps, of which about £950,000 was placed into a single product known as the Paraiba Bond. AA promoted the bond, receiving commission of 25 per cent, according to the judgment.

About £42m of the cash was invested in ethical tree plantations in Costa Rica, which suffered significant damage during Hurricane Otto in late 2016.

Legal representatives for Alexandra Associates and Craig and Lee Lummis said they would be appealing the legal rulings against them, and would seek a second trial to settle the issue of losses.

“Whilst 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,” said Omid Khub of Zakery Khub Solicitors.

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