Upheld: Investment mis-selling complaint against J M Finn & Co Ltd
Financial Ombudsman decision DRN-4694941 of 2024-03-20T00:00:00+00:00. Investment mis-selling complaint against J M Finn & Co Ltd. Outcome: Upheld.
Decision detail
| Reference | DRN-4694941 |
|---|---|
| Decision date | 2024-03-20T00:00:00+00:00 |
| Firm | J M Finn & Co Ltd |
| Product | Pension |
| Claim type | Investment mis-selling |
| Outcome | Upheld |
| Remedy | JM Finn must: (1) Compare the actual value of Mr H's SIPP portfolio during the redress period (23 November 2022 to transfer completion date) against the fair value using JM Finn's agreed/mandated discretionary portfolio benchmark (MSCI Growth TR Index); (2) Pay compensation equal to the difference if fair value exceeds actual value, plus 8% simple interest per year from the end date to settlement; (3) Pay compensation into the pension plan if possible (allowing for charges and tax relief), or directly to Mr H if not; (4) Apply notional tax allowance at Mr H's marginal rate (75% of compensation if tax-free lump sum available); (5) Pay £350 for distress, trouble and inconvenience; (6) Provide clear calculation details to Mr H; (7) Provide details of the agreed/mandated portfolio and MSCI Growth TR Index performance information for verification. |
Summary
Mr H, a longstanding client of JM Finn, instructed the transfer of his discretionary SIPP to Church House Investments Limited in November 2022 following his portfolio manager's move to that firm. JM Finn wrongly interpreted the transfer instruction as termination of its management service and ceased active discretionary management on 23 November 2022, despite no explicit termination instruction being given. The SIPP transfer was not completed until June 2023, leaving the portfolio unmanaged for approximately six months. Mr H discovered the lack of management in April 2023 and complained. The ombudsman upheld the complaint, finding JM Finn made an erroneous assumption without contractual or instructional basis, failed to provide notice or ensure alternative arrangements, and breached its regulatory duties to act with due skill, care and diligence and in the client's best interests. JM Finn was ordered to calculate and pay compensation based on the difference between the actual portfolio value and its fair value using the MSCI Growth TR Index benchmark, plus 8% interest, £350 for distress, and to provide clear calculation details.
The Ombudsman's reasoning
The ombudsman found that JM Finn made a wrongful assumption that Mr H's transfer instruction constituted termination of its management service, when the contractual terms and communications made clear these were separate matters. No explicit termination instruction was ever given. The regulatory context (FCA Principles 2, 3, and 6, and COBS 2.1.1R) required JM Finn to act with due skill, care and diligence, manage its affairs responsibly, and uphold the client's best interests. Given the known risks of unmanaged portfolios during transfers and the time such transfers typically take, JM Finn should have either not made the erroneous assumption or, if it had, should have provided clear notice to Mr H that it had ceased management and advised him to ensure alternative arrangements were in place. The ombudsman rejected the argument that Mr H should have noticed the cessation of management fees in his statements, as he had no reason to check fees or expect the service to stop when he had not requested termination.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| J M Finn & Co Ltd, all decisions | 13 | 19% |
| Investment mis-selling, all decisions | 14,206 | 37% |
| Pension, all decisions | 15,579 | 47% |
Source
Read the original decision on the Financial Ombudsman Service website