Not upheld: scam prevention and market manipulation detection complaint against Robinhood U.K. Ltd

Decision detail

Summary

Mr S complained that Robinhood U.K. Ltd failed to prevent him losing money to a 'pump and dump' scam after he purchased shares in company X in March 2025 following a social media promotion. He argued that Robinhood should have identified the market manipulation sooner and taken action to prevent harm, particularly given his behaviour as a new, inexperienced customer. Robinhood declined the complaint, citing its execution-only service model where customers are solely responsible for investment decisions. The FOS ombudsman upheld Robinhood's position, finding that the execution-only nature of the service meant no suitability assessment was required, Mr S's behaviour was not unusual enough to warrant intervention, and market manipulation is inherently difficult to detect in real-time. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that Robinhood's execution-only service model meant all investment decisions were Mr S's responsibility alone, with no requirement for suitability assessment or monitoring. While Robinhood must have systems to prevent and detect market manipulation, the ombudsman was satisfied such systems were in place and followed. Market manipulation is inherently difficult to identify in real-time, and the absence of regulatory warnings or exchange suspension, combined with private discussion of the stock via WhatsApp, meant Robinhood could not reasonably have been expected to identify the scheme sooner. Mr S's behaviour as a new customer (opening an account, depositing funds, investing in a volatile stock) was not unusual enough to warrant intervention, particularly given his prior investing experience.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website