Partially upheld: ISA transfer delay and incomplete asset transfer due to settlement system incompatibility complaint against Freetrade Limited

Decision detail

Summary

Mr A complained that Freetrade unfairly delayed his ISA transfer and failed to transfer two holdings due to settlement system incompatibility. The transfer was requested on 17 April 2025 and completed on 11 June 2025, with a cash balance of £10,882.62 held uninvested during the delay. The ombudsman found that the settlement system incompatibility (CREST vs Euroclear) was not Freetrade's fault and that it took reasonable steps to attempt the transfer, so no compensation was due for those holdings. However, the cash component should have transferred by 2 May 2025 under industry guidance, so the ombudsman upheld the complaint in part and directed Freetrade to pay 8% simple interest on the delayed cash plus £155.99 compensation for inconvenience.

The Ombudsman's reasoning

The ombudsman found that settlement system incompatibility was a known and legitimate reason for in-specie transfer failure, not caused by Freetrade's fault. Freetrade took reasonable steps by submitting the transfer request and contacting Mr A when it failed, offering practical alternatives. However, the cash component transfer was delayed beyond industry guidance (should have been 2 May 2025, not 11 June 2025), warranting compensation for the deprivation of use of those funds. The rules do not obligate Freetrade to waive fees or overcome settlement system incompatibility by any means necessary.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website