Not upheld: Failure to intervene in investment scam / Alleged breach of market abuse detection obligations complaint against Interactive Investor Service Limited

Decision detail

Summary

Mr I, aged 69, invested in Jayud Global Logistics Limited (JYD) shares through his SIPP with Interactive Investor Service Limited after being influenced by an unauthorised third party via private messaging. II suspended further purchases on 29 March 2025 after detecting unusual trading volume increases. Mr I complained that II failed to intervene to protect him from the pump and dump scam and breached market abuse detection obligations. The ombudsman found that II's execution-only service model meant Mr I bore responsibility for investment decisions, II had no knowledge of the third-party involvement, and execution-only platforms have limited visibility of scams occurring outside their platforms. The complaint was not upheld as II took reasonable protective steps once it detected suspicious patterns and had no obligation to identify market manipulation that occurred via external channels beyond its control.

The Ombudsman's reasoning

The ombudsman found that II operated an execution-only service where Mr I bore responsibility for investment decisions. The firm had no obligation to assess suitability or provide ongoing monitoring. While an unauthorised third party was involved, II had no knowledge or control over this activity and could not reasonably have been aware of it. II took reasonable protective steps by suspending purchases when it detected unusual trading patterns, though it could not identify the cause at that time. The ombudsman noted that execution-only platforms have limited visibility of pump and dump scams as the manipulation occurs outside the platform via social media and private messaging. II could reasonably rely on NASDAQ's regulatory framework and the exchange's own market abuse detection systems. There was insufficient evidence that II should have identified suspicious patterns earlier or that it breached UK MAR obligations.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website