Upheld: Investment mis-selling complaint against Fairstone Financial Management Limited

Decision detail

Summary

Mrs C complained that Fairstone adviser Mr S gave her unsuitable advice to invest approximately £240,000 of her SIPP in Bond B, a high-risk unregulated bond, in October 2020. Although Fairstone argued it provided no advice and Mrs C was a sophisticated professional client who made her own investment decision, the Ombudsman found that contemporaneous evidence supported Mr S advised Mrs C to invest in Bond B. The Ombudsman concluded Mrs C was not fairly categorised as an elective professional client because Fairstone failed to adequately assess her expertise; her banking experience was limited and historic, ending around 2009, and she had consistently been treated as a retail client. The advice was unsuitable as Bond B was a high-risk investment inappropriate for most pension investors and Mrs C lacked relevant professional knowledge. Fairstone is responsible for Mr S's actions through both apparent authority and vicarious liability. The complaint was upheld and Fairstone was ordered to calculate losses and compensate Mrs C.

The Ombudsman's reasoning

The Ombudsman concluded that: (1) Fairstone is responsible for Mr S's acts through both apparent authority and vicarious liability; (2) Mr S advised Mrs C to invest in Bond B despite no formal documentation, based on contemporaneous evidence including the timing of the SIPP setup, the meeting arranged with Mr C shortly before the investment, the pattern of Mr S referring clients to DFM MC for bond investments, and the subsequent involvement of Mr S in managing the investment; (3) Mrs C was not fairly categorised as an EPC because Fairstone did not conduct an adequate assessment of her expertise and experience in light of the Bond B transaction, her professional knowledge was limited and historic, and she had consistently been treated as a retail client; (4) the advice was unsuitable because Bond B was a high-risk unregulated investment inappropriate for most pension investors, Mrs C had no relevant professional knowledge or experience, and no adequate due diligence or suitability assessment was undertaken; (5) Mrs C is an eligible complainant as a consumer despite signing an EPC form, because the exception in DISP 2.7.9A applies where the customer acted as a consumer in relation to the activity.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website