(3) the Sipp provider had received information which cast doubt on the integrity of those who were promoting the proposed investment, or as to whether underlying assets actually existed;
(4) the Sipp provider had learnt of problems, such as a possible insolvency, which affected the proposed investment.
"In all of these situations, I consider that there is scope for the operation of the Principles, and that Cobs 11.2.19R does not mandate the Sipp provider to proceed to execute the transaction," the judge said.
Berkeley Burke's argument the Fos had been wrong in ruling differently to the Pensions Ombudsman, which had ruled on several cases with similar facts, was also dismissed.
Berkeley Burke is looking to appeal the dismissal.
Mark Smith, chief operating officer at Sipp firm Mattioli Woods, said the finding that Sipp providers had a duty to check the underlying business could have repercussions on the wider market.
He said: "[The ruling means] there should have been more due diligence carried out than there was therefore the fault lies with the Sipp operator."
Berkeley Burke is facing a number of further claims brought by law firm Anthony Philip James & Co.
Glyn Taylor, solicitor at the firm, welcomed the "clarification" brought by ruling.
He said: "The judgement has now clarified that the concept of due diligence inevitably brings to mind the concept of inquiry or investigation. They are not distinct concepts."
Martin Tilley, head of pensions technical at Sipp provider Dentons, agreed the ruling was profound but he cautioned the case may not serve as a precedent because other cases would have their own particular facts.
He said: "We will have to see to what extent the levels of due diligence now confirmed as required applied to each individual asset and whether or not the investment was a real investment that perhaps simply hasn't performed as expected or whether or not it should have been accepted at all.
"We could well find that the Sipp market for non-regulated assets contracts significantly."
A case involving Sipp provider Carey Pensions is currently awaiting judgement.
This case centres on the question of whether or not Carey was right to accept business on the insistence of a client.
The client, Mr Adams, had also suffered losses after investing in illiquid commercial property.
The client had signed an execution-only contract but his lawyers argued regulatory principles around treating customers fairly meant he should have never been allowed to open the Sipp without advice.
Mr Tilley said: "It would be very difficult and perhaps very awkward if the judge in that case were to arrive at a different ruling, however they may take into account other factors or implications of that particular case.
