Not upheld: failure to exercise due diligence; alleged mis-classification of complex product; alleged unsuitability of product for retail investors complaint against AJ Bell Securities Limited

Decision detail

Summary

Dr P complained that AJ Bell Securities failed to exercise due diligence by making a synthetic Russian equity ETF available to retail customers through Junior ISAs. His daughters' investments of approximately £9,000 each were liquidated in 2023 for approximately £3 each following a corporate action triggered by the Ukraine war. Dr P argued the fund was too complex and unsuitable for retail investors. The ombudsman found the fund was not classified as complex under FCA regulations, was properly disclosed through the KIID, and was suitable for execution-only retail clients. The complaint was not upheld as the losses resulted from an exceptional market event rather than any breach by AJ Bell.

The Ombudsman's reasoning

The ombudsman determined that while the fund was high-risk due to its synthetic structure using swaps and derivatives, it was not classified as 'complex' under FCA regulatory definitions. The fund was properly regulated, tradable on mainstream exchanges, and had existed since 2007. The KIID provided clear disclosure of risks including emerging market exposure, political/economic risks, and single-country concentration. As an execution-only client, Dr P was not owed a suitability assessment, only appropriate information and correct classification. The ultimate loss resulted from an exceptional market event (Ukraine war and subsequent fund liquidation) that was not foreseeable or preventable by AJ Bell in 2019.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website