Upheld: unsuitable investment / breach of appropriateness testing rules (COBS 10A) complaint against James Brearley & Sons Limited
Financial Ombudsman decision DRN-6405168 of 2026-06-12T00:00:00+00:00. unsuitable investment / breach of appropriateness testing rules (COBS 10A) complaint against James Brearley & Sons Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-6405168 |
|---|---|
| Decision date | 2026-06-12T00:00:00+00:00 |
| Firm | James Brearley & Sons Limited |
| Product | Investment |
| Claim type | unsuitable investment / breach of appropriateness testing rules (COBS 10A) |
| Outcome | Upheld |
| Remedy | James Brearley must compensate Mr S by: (1) comparing the performance of the investment against a benchmark (50% FTSE UK Private Investors Income Total Return Index; 50% average rate from fixed rate bonds) from date of investment (2 November 2021) to date of final decision, and paying the difference if fair value exceeds actual value (actual value deemed nil as shares have no realisable value); (2) adding 8% simple interest per year from final decision to settlement if not settled within 28 days; (3) paying £200 for distress and inconvenience. James Brearley may take ownership of the shares at its own cost. Interest may be taxable. |
Summary
Mr S, a retired investor with limited investment experience and modest means, invested £14,000 in Astute Capital Plc 7.5% bonds through a James Brearley ISA in November 2021, using proceeds from redemption of earlier Astute bonds. James Brearley failed to conduct a required appropriateness test and should not have allowed the unsuitable investment to proceed. The bonds subsequently became worthless when Astute Capital entered liquidation after failing to pay interest and maturities. The ombudsman upheld the complaint, finding James Brearley's breach caused Mr S's loss, and ordered compensation calculated by comparing the investment's performance against a benchmark of 50% equity index and 50% fixed-rate bonds, with the actual value deemed nil. James Brearley's argument that it should receive credit for benefits from its earlier breach enabling the September 2021 redemption was rejected as the relevant law concerns benefits arising after, not before, the breach.
The Ombudsman's reasoning
The ombudsman found that COBS 10A appropriateness rules applied and no exemptions were available. James Brearley failed to carry out a required appropriateness test. Had such a test been conducted, it should have concluded the Astute Capital bond was not appropriate for Mr S given his low risk profile, inexperience, and limited investment experience. The firm should have provided a warning and should not have allowed the investment to proceed. The investment was a new investment (not a reinvestment) made after Mr S received redemption proceeds, distinguishing it from cases where early redemptions were conditional on reinvestment. Mr S would not have suffered the loss had James Brearley not executed the November 2021 investment. While James Brearley argued it should receive credit for benefits arising from its earlier breach enabling the September 2021 redemption, the ombudsman rejected this as the relevant law concerns benefits arising after the breach, not before. The appropriate benchmark for compensation is 50% FTSE UK Private Investors Income Total Return Index and 50% average fixed-rate bond returns, reflecting Mr S's likely risk profile.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| James Brearley & Sons Limited, all decisions | 8 | 44% |
| Investment, all decisions | 13,970 | 35% |
Source
Read the original decision on the Financial Ombudsman Service website