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What is the future of unregulated introducers following the Court of Appeal’s affirmation of the decision at first instance in Financial Conduct Authority -v- Avacade Limited (In Liquidation)?

  • United Kingdom
  • Financial services disputes and investigations


The Court of Appeal has affirmed the first instance decision in Financial Conduct Authority v Avacade Limited (In Liquidation) & Others [2020] EWHC 1673 (Ch) (“the Avacade case”).  This follows the high profile judgments in Berkeley Burke SIPP Administration Ltd -v-Financial Ombudsman Service Limited and Adams -v- Options UK Personal Pensions LLP . The appeal judgment in the Avacade case further considers the role of unregulated introducers in the Self-Invested Personal Pension (“SIPP”) industry, and the application of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (“RAO”). The analysis of the RAO in this regard will be of wider application to the regulated financial services sector.

The background and decision at first instance

The Avacade case concerns a number of relationships and dealings between: (1) Avacade, related companies and its directors (collectively “Avacade”); and (2) a number of intermediaries, SIPP providers, and investment providers.

In brief, Avacade sought to facilitate the transfer of individuals’ existing pensions into SIPPs, with a view to the individuals making investments via those SIPPs in a specific set of investments. The lengthy first instance judgment provides the full detail as to Avacade’s business practices and relevant relationships.

Avacade was not authorised to advise individuals or to arrange investments.  The FCA was concerned that Avacade was funnelling customers towards the transfer of their existing pension to a SIPP, and subsequently to make an unregulated investment. The FCA considered that the actions of Avacade amounted to advising and/or arranging investments without the necessary authorisation. That would be a breach of the general prohibition in s.19 of the Financial Services and Markets Act 2000 (“FSMA”), and a criminal offence.

The High Court held at first instance that Avacade had ‘arranged’ and ‘advised’, contrary to Articles 25 and 53 of the RAO, respectively, without holding the relevant permissions, and could not rely on any of the exceptions or exemptions under the RAO. Avacade was therefore in breach of the general prohibition under FSMA. We discuss the approach at first instance in more detail here.

The appeal 

Avacade sought to appeal the substantive judgment on nine grounds, with grounds (3) to (5) ultimately not being pursued, and an additional ground flowing from the judgment on remedy. Avacade was unsuccessful on all grounds (and some grounds were not heard by the Court of Appeal on the basis of procedural irregularities).

Arranging – Article 25

The Court of Appeal rejected the appeal on Article 25, finding:

  • that simply because the general prohibition carries with it criminal consequences does not mean that a narrow interpretation of Article 25(2) must be taken– the purpose of FSMA and the statutory framework, being the protection of consumers, must also be adequately reflected in any interpretation.  What is required is “simply a fair reading of the ordinary meaning of the words in the light of the overall purpose of the section in its statutory framework”;
  • Avacade’s suggestion that ‘making arrangements’ in Article 25(1) should be interpreted in the same manner as in Article 25(2) was incorrect. Whilst the word ‘arrangement’ does not have a different meaning across each section, Articles 25(1) and (2) clearly had different purposes, indicated by their language and the fact that the exclusion under Article 26 applies only to Article 25(1). The Court of Appeal further commented that there was no need to apply a test of causation to Article 25(2) as it was concerned with the intent of an arrangement, not the outcome – “You cannot make the proverbial horse drink, but taking it to water involves making arrangements with a view to it drinking”;
  • that Newey LJ’s approach in Adams, with regard to the need to view the transaction as a “single braided stream of advice” and noting the “importance of standing back and looking at the conduct of the unregulated activity holistically” should be endorsed;
  • the exemption relied on by Avacade under Article 29 (primarily Article 29(c) – that Avacade did not receive any pecuniary reward from any person other than the client) was not properly pleaded and the appeal could not be considered. Notwithstanding that the Court of Appeal commented that, in any event, the provision was not engaged, as Avacade had clearly on a holistic view received commission from the SIPP providers, which flowed from the arrangements – “The commission arose out of making the arrangements, as a whole, and the arrangements as a whole were with a view to the purchase of the securities because they involved entry into the SIPPS”.

The Court of Appeal also dismissed Avacade’s appeal as to the basis of the restitution orders made by the High Court.


Following Adams and Avacade it remains to be seen what role remains for unregulated introducers in the financial services industry, and what commercial value they can truly add whilst operating within the narrow parameters laid down by the Court of Appeal.

Regulated firms need to be cautious about both the arrangements that they enter into with unregulated introducers, but also to ensure that they do not inadvertently go beyond the limits of their own permissions.