Not upheld: Fraud reimbursement (APP scams) complaint against Saxo Capital Markets UK Ltd

Decision detail

Summary

Mr S complained that Saxo Capital Markets UK Ltd failed to prevent him losing money in a 'pump and dump' market manipulation scam after he purchased shares in company X based on social media and group chat promotion. Saxo provided an execution-only service with no advice or suitability obligations, and the scammers' promotional activities were conducted privately without Saxo's knowledge. Although the ombudsman accepted that unauthorised scammers had carried out regulated activity in breach of the General Prohibition, it concluded that s27 FSMA did not provide grounds for upholding the complaint because it would be just and equitable to enforce the agreement between Mr S and Saxo, given Saxo's lack of knowledge, control, or financial benefit from the scam. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman concluded that Saxo provided an execution-only service where Mr S bore sole responsibility for investment decisions, with no obligation on Saxo to assess suitability or advise on particular stocks. While the scammers who promoted the scheme were unauthorised persons carrying out regulated activity in breach of the General Prohibition, s27 FSMA did not provide a basis for upholding the complaint because it would be 'just and equitable' under s28(3) FSMA to enforce the agreement. Saxo had no knowledge of or control over the scammers' activities, did not knowingly accept introductions from unauthorised parties, and did not financially benefit beyond standard fees. Market manipulation is typically difficult to identify until after the fact when trading patterns clearly show manipulation, and there were no regulatory warnings or exchange suspensions regarding X shares. Saxo's published educational materials on fraud risks and its eventual action to place X shares in 'reduce only' status demonstrated reasonable precautions.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website