Not upheld: Unknown / needs review complaint against Pepperstone Limited

Decision detail

Summary

Mr M complained that Pepperstone inappropriately upgraded his account from retail to elective professional client (EPC) status, resulting in £674,836 in trading losses. Mr M argued he was unsuitable for EPC status and that Pepperstone failed to properly verify his eligibility against the FCA's quantitative test criteria. The ombudsman found that while Pepperstone had shortcomings in its assessment—particularly failing to obtain complete trading statements and inadequately verifying professional experience—it was fair and reasonable for the firm to rely on Mr M's representations given his prior EPC status with another broker, his experienced and persuasive presentation, substantial trading history, and senior banking background. The ombudsman concluded that Mr M deliberately presented himself as meeting the criteria and was fully aware of the risks involved, making his losses trading losses rather than the firm's responsibility. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman acknowledged Pepperstone's shortcomings in assessing Mr M's quantitative test eligibility, particularly regarding incomplete trading history verification and inadequate professional experience verification. However, the ombudsman concluded it was fair and reasonable for Pepperstone to rely on Mr M's representations under COBS 10.2.4R given: (1) Mr M's prior EPC status elsewhere demonstrated his knowledge of the process; (2) his experienced, persuasive, and coherent presentation during calls; (3) his substantial trading history and volumes; (4) his senior banking background; and (5) the fact that had Pepperstone requested additional evidence, Mr M would have provided it. The ombudsman found Mr M deliberately presented himself as meeting criteria he may not have fully satisfied, and that his losses were trading losses rather than resulting from firm misconduct. The ombudsman rejected arguments about family bereavement affecting Mr M's decision-making, finding no corroborating evidence in the call recordings.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website