Father and Son who ran Unregulated Broker Banned for 12 Years
A father and son who operated an unregulated investment broking service, Avacade Ltd, have been banned from holding directorships for six years each.
Craig Lummis, 62, and his son Lee 37 were banned for paying themselves £1.3 million, ahead of what was owed to creditors.
The case was heard in Manchester’s High Court and the ban began on 17 September 2021. The ban means the pair cannot be involved in the promotion, formation, or management of a company without the permission of the court. Last year, regulator the Financial Conduct Authority also took legal action against the business over misleading advice and pensions transfers.
What was Avadade?
The business was incorporated in January 2010 and traded as Avacade Investment Options. It offered unregulated investment brokering services, including free pension reviews, and also invited clients to invest in Self-Invested Personal Pensions schemes (Sipps).
This included investment through the business it had connections to including HotPods (office space), tree plantations in Costa Rica, and Brazilian property developments. One of these was through Ethical Forestry, where directors had also been banned for six years in 2019 after withdrawing millions for its planning scheme.
When did Avacade stop trading?
Avacade ceased trading in August 2014 and went into liquidation in November 2015. It was then investigated by the Insolvency Service, which found the directors’ conduct had fallen below expected standards in a number of ways. This included:
- Selling the company’s client database to a connected business for over £150,000, when the business was insolvent. But, instead of the business receiving the payment, just over £75,000 was deducted from the pair’s loan accounts.
- Between August 2014 and May 2015, Avacade collected commission worth more than £1.6 million, but Craig and Lee took £647,000 each to reduce their director’s loan accounts.
Rob Clarke, the chief investigator of the Insolvency Service, said: “It’s clear that directors must treat all creditors fairly when they know their company is insolvent. Craig and Lee Lummis totally disregarded their duties by ignoring the ongoing investigation into the tax planning scheme and ensuring they benefited personally from Avacade’s only assets.
“This failing led to them each being banned from acting as a director for a significant period of time and should serve as a warning to other directors who follow a similar path.”
Why did the FCA take action against Avacade?
In August 2020, the Court of Appeal upheld a High Court Ruling that parties with connections to Avacade should pay over £10 million in compensation to investors who were induced to transfer their pension savings into Sipps. This case was brought by the regulator Avacade Limited and connected firm, Alexandra Associates trading as Avacade Future Solutions.
Craig Lummis, Lee Lummis and Raymond Fox were accused of arranging and promoting investments without FCA authorisation, and making false and misleading statements to investors that induced them to transfer their pensions into Sipps and then into alternative investments.
The court ordered Avacade to pay £10 million, Alexandra Associates to pay £715,000, Craig Lummis and Lee Lummis to pay out £2.5 million each, and Raymond Fox to pay £1.7 million.
The businesses held some £92 million of pension assets and most of this came from consumers who transferred money into Avocade’s Sipps. Mark Steward, the FCA’s executive director of enforcement and market oversight, said: “The Court of Appeal decision vindicates the original decision and will help vindicate the rights of more than 2,000 investors who have lost pension money through the defendants’ conduct in leading them into these toxic and high-risk investments.”