Not upheld: failure to comply with PRIIPs regulations; failure to provide Key Information Documents (KIDs) complaint against Hargreaves Lansdown Asset Management Limited

Decision detail

Summary

Mr E complained that Hargreaves Lansdown Asset Management Limited failed to comply with PRIIPs regulations introduced in 2018 by not providing Key Information Documents (KIDs) for Business Development Companies (BDCs) and allowing him to invest in these high-risk US securities, resulting in significant losses. HL argued that there was regulatory uncertainty about whether BDCs fell within PRIIPs scope, that US manufacturers do not provide KIDs, and that it provided an execution-only service with access to prospectuses and other information. The ombudsman found the complaint not upheld, concluding that the regulatory uncertainty was genuine and reasonable, HL kept the matter under review and took appropriate action in 2024, and Mr E bore responsibility for his own investment decisions as an active investor who deliberately sought BDC exposure representing 44% of his portfolio.

The Ombudsman's reasoning

The ombudsman found that there was genuine industry uncertainty about whether BDCs fell within PRIIPs scope from 2018-2024, which was reasonable given their closed-ended US structure and incompatibility with PRIIPs technical standards. HL was not required to prevent BDC sales during this period of ambiguity. Since HL provided an execution-only service and Mr E actively sought out BDCs (representing 44% of his portfolio), the responsibility for investment decisions rested with Mr E. Sufficient alternative information was available through prospectuses, fee disclosures, risk factors, and NAV data. The ombudsman was not persuaded that the absence of a KID would have materially changed Mr E's investment decisions, and HL's 2024 action to restrict further purchases reflected appropriate clarification of regulatory position.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website