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

Decision detail

Summary

Mr C, a long-standing client of Fairstone since 2018, received advice from Mr S to invest £500,000 of his SIPP into Bond B and Bond P in August 2020. Fairstone denied providing any advice on these investments and argued Mr C was an elective professional client who made his own investment decisions. The Ombudsman found that Mr S did advise Mr C to invest in the bonds based on contemporaneous evidence including a planned meeting on 25 June 2020 followed by document signing the next day, Mr S's involvement in managing the SIPP, and Mr S's later involvement in advising on bond reinvestment. Mr C was not fairly categorised as a professional client because Fairstone did not conduct adequate assessment of his expertise relevant to these high-risk unregulated bonds, and his banking background was in corporate finance, not investment management. The advice was unsuitable because the bonds were high-risk, unregulated investments representing a very significant portion of Mr C's pension provision, and no adequate due diligence or risk disclosure was provided. Fairstone is responsible through both apparent authority and vicarious liability for Mr S's actions.

The Ombudsman's reasoning

The Ombudsman found that Mr S gave advice to Mr C to invest in Bond B and Bond P based on contemporaneous documentary evidence including the planned meeting on 25 June 2020, the timing of document signing the next day, Mr S's involvement in managing the SIPP, DFM MC's evidence of Mr S referring multiple clients for bond investments, and Mr S's later involvement in advising on Bond P reinvestment. Mr S was acting in his capacity as a Fairstone adviser, not in a personal capacity, as evidenced by his use of Fairstone email address, his approved person status, and the established adviser-client relationship. Fairstone is responsible through both apparent authority and vicarious liability. Mr C was not fairly categorised as an EPC because Fairstone did not conduct adequate assessment of his expertise relevant to these specific high-risk unregulated bonds, and his banking background was in corporate finance, not investment management. The advice was unsuitable because the bonds were high-risk, unregulated investments representing a very significant portion of Mr C's pension provision, and no adequate due diligence or risk disclosure was provided. Mr C was reliant on Mr S's advice as his financial adviser and had been treated as a retail client for all previous pension advice.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website