Upheld: Service failures generally complaint against LMAX Broker Limited
Financial Ombudsman decision DRN-2509613 of 2021-01-26T00:00:00+00:00. Service failures generally complaint against LMAX Broker Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-2509613 |
|---|---|
| Decision date | 2021-01-26T00:00:00+00:00 |
| Firm | LMAX Broker Limited |
| Product | Investment |
| Claim type | Service failures generally |
| Outcome | Upheld |
| Remedy | LMAX Broker Limited must pay: (1) the total trading account balance as it stood on 29 May 2019; (2) all trading commissions incurred for trading after 29 May 2019; (3) interest at 8% simple per annum from 29 May 2019 to settlement date; (4) £500 for trouble and inconvenience. Payment is subject to the FOS compensation limit applicable to the complaint event date. LMAX must provide a clear calculation of the compensation payment. |
Summary
Z, a company, held a trading account with LMAX from April to August 2019 with an initial £500,000 deposit. Mr H, Z's owner, intended to use Mr K to trade in the account but never returned the executed Limited Power of Attorney required to authorise third-party access. Despite this, Mr H shared login details with Mr K, and LMAX engaged in multiple telephone calls with Mr K discussing trading details and strategies while knowing the LPoA had not been completed. The account suffered approximately £176,000 in losses by closure. The ombudsman upheld the complaint, finding LMAX breached its strict regulatory safeguarding obligations by failing to suspend the account upon discovering unauthorised third-party access and by actively facilitating Mr K's involvement. LMAX was ordered to compensate Z for losses from 29 May 2019 onwards (when no losses had yet occurred) plus interest and £500 for inconvenience.
The Ombudsman's reasoning
LMAX had a strict regulatory liability to safeguard Z's account under Article 40 of the RAO and FCA Principles 2, 3, 6, and 10. The telephone call evidence proved LMAX was aware of unauthorised third-party access by Mr K without an executed LPoA and actively engaged with Mr K regarding trading details despite this breach. LMAX was contractually and regulatorily required to suspend the account upon discovering this security breach but failed to do so. Although Mr H wrongly shared login details without authority, this did not dissolve LMAX's safeguarding responsibility. LMAX compounded its failure by facilitating the unauthorised involvement it should have prevented. Causation is established: if LMAX had suspended the account on 29 May 2019 when it knew of Mr K's involvement, no further losses would have occurred as none had been incurred by that date. LMAX's continued engagement with Mr K despite accumulating losses demonstrates it either facilitated or participated in causing the financial loss.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| LMAX Broker Limited, all decisions | 4 | 50% |
| Service failures generally, all decisions | 32,767 | 33% |
| Investment, all decisions | 14,114 | 34% |
Source
Read the original decision on the Financial Ombudsman Service website