UT (Tax & Chancery) UT/2022/000100 and UT/2022/000107 - [2024] UKUT 00156 (TCC)

Mr Burdett was a director of and 50% shareholder in Synergy Wealth Limited (“Synergy”), which was an Appointed Representative of Strategic Wealth UK Limited (“SWUK”).

Mr Burdett had worked as a financial adviser for 11 years and held the CF30 (Customer) controlled function at SWUK.

Mr Burdett did not personally advise the majority of Synergy clients, but he was involved in the production of template documents described below.

Despite being a director, Mr Burdett was not approved by the Authority to perform the CF1 (Director) controlled function at Synergy.

Mr Goodchild was the founder and Chief Investment Officer of Westbury Private Clients LLP (“Westbury”), a discretionary investment manager. He had ultimate responsibility for deciding on Westbury’s business activity and investment decisions.

Synergy advised retail pension holders to switch their pensions into a scheme called the Westbury SIPP, which was created and managed by Westbury. Westbury put investors’ monies into ‘Model Portfolios’, designed by Westbury, described as ‘Global Cautious’, ‘Global Balanced’, and ‘Global Growth’.

The Resort Group PLC (“TRG”) is or was an offshore property developer which intended to develop hotels in Cape Verde. TRG offered three different types of investment. On the Authority’s case, all TRG investments were high risk.

Mr Burdett and Mr Goodchild set up a structure by which Synergy would recommend that clients switch pensions into the Westbury SIPP, and that clients would be allocated by Westbury to Model Portfolios by reference to risk profile scores calculated by Synergy. For example, a client with a low risk profile score would be allocated to the ‘Global Cautious’ portfolio.

Both men knew and intended that, despite their different names, each of the Model Portfolios would invest 40% of pension holders’ funds in TRG investments.

Mr Burdett was involved in the production of template documents for Synergy which informed clients that the Westbury SIPP was appropriate to achieve the clients’ objectives and suggested that the clients would obtain a ‘highly diversified portfolio’. The reports provided ‘target asset mixes’, complete with pie charts suggesting how funds should be allocated. There was no mention of TRG, and the pie charts were inconsistent with the allocation of 40% of funds to TRG investments. The Authority considers the reports to be misleading, and Mr Burdett to be at least reckless as to their contents.

Both under the relevant rules and Westbury’s contract with Synergy, Westbury (in effect, Mr Goodchild) was responsible for ensuring that the allocations were suitable for the clients’ risk appetites. The allocation of 40% TRG investments to clients with lower risk profile scores was unsuitable, and Mr Goodchild acted recklessly in respect of the allocations. Further, the ‘Global Cautious’ and ‘Global Balanced’ names were recklessly inappropriate, given the high risk of those portfolios.