Not upheld: Investment mis-selling complaint against Webull Securities (UK) Ltd trading as Webull

Decision detail

Summary

Mr A complained that Webull Securities was responsible for losses exceeding £94,000 he suffered after trading shares in company J based on advice from an unauthorised third party T found on social media. Mr A alleged Webull breached its regulatory obligations under the Consumer Duty, UK Market Abuse Regulation, and section 27 FSMA by failing to detect the pump and dump scam, failing to identify red flags in abnormal trading patterns, and failing to prevent the trades. Webull operated on an execution-only basis, had no knowledge of T or the scam, and argued the price movements were not readily distinguishable from normal market behaviour. The ombudsman found Webull not at fault, concluding that the price movements were not sufficiently unusual to alert Webull to manipulation, Webull had no visibility of the private social media coordination, and it would be just and equitable to enforce the agreement under section 28(3) FSMA because Webull had no knowledge of the unauthorised activity.

The Ombudsman's reasoning

The ombudsman concluded that Webull was not at fault because: (1) the price movements in J, while marked, were not so unusual as to be outside normal behaviour for smaller cap stocks and were not readily distinguishable from ordinary market activity; (2) Webull had no visibility of the private social media coordination of the scam and could not reasonably have been aware of it; (3) the sharp price drop that revealed the manipulation occurred too late for Webull to prevent Mr A's losses; (4) Webull was entitled to take comfort from J being listed on an established exchange with its own regulations; (5) Mr A's decision to invest in J predated opening his Webull account and was not caused by Webull listing J; (6) under section 27 FSMA, while an unauthorised third party was involved, it would be just and equitable to enforce the agreement because Webull had no knowledge of T's involvement or wrongdoing; (7) Webull's obligations under UK MAR did not require it to detect this particular manipulation given the evidence available to it at the time.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website