Not upheld: Investment mis-selling complaint against Robinhood U.K. Ltd

Decision detail

Summary

Mrs M complained that Robinhood U.K. Ltd failed to protect her from a pump and dump investment scam involving shares in company J, which she purchased in March 2025 after being encouraged by an unregulated third party on a private messaging group. She lost a significant amount when the share price collapsed in April 2025 and sought compensation, arguing that Robinhood should have detected the market manipulation and either warned her or restricted trading. The ombudsman found that Robinhood could not reasonably have identified the scam, as the promotion occurred outside its platform and the price movement could be explained by legitimate market forces. The ombudsman also rejected Mrs M's argument based on section 27 FSMA, finding that Robinhood had no knowledge of the third party and entered into transactions in good faith, and that a court would likely exercise its discretion under section 28 to enforce the agreement anyway. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that while Robinhood has some obligations to monitor trading under UK Market Abuse Regulations, it is difficult for a broker to identify a pump and dump scam before or during the event, particularly when the promotion occurs outside the platform via social media and private messaging. The price movement in J shares, while substantial, could be explained by legitimate factors such as increased retail interest, momentum trading, or speculative buying, especially given the stock's volatility and low liquidity. The ombudsman also found that section 27 FSMA did not apply in a way that would render the agreement unenforceable, as Robinhood had no knowledge of the third party's existence or potential breach of the General Prohibition, and the circumstances were substantially different from Adams.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website