Not upheld: Investment mis-selling complaint against Trading 212 UK Limited

Decision detail

Summary

Mr C invested £12,387.27 in OST shares through Trading 212's execution-only platform after being directed to do so by a third party via social media and private messaging, unaware he was a victim of a pump and dump scam. He complained that Trading 212 failed to intervene despite the artificial price inflation and extreme volatility, and breached its regulatory obligations under the Market Abuse Regulation and FCA Principles. He sought a full refund plus interest and compensation. Trading 212 argued it provided only an execution-only service with no advisory role, that OST was a legitimate NASDAQ-listed security, and that it was not responsible for detecting market abuse which is the responsibility of the exchange and regulator. The ombudsman found the complaint not upheld, reasoning that execution-only platforms have limited visibility of pump and dump scams which operate through external social media channels, that sudden price movements can appear legitimate in isolation, and that there was insufficient evidence Trading 212 should have identified the manipulation or that it lacked adequate systems and controls.

The Ombudsman's reasoning

The ombudsman found that Trading 212, as an execution-only platform, had limited regulatory obligations and was not responsible for assessing investment suitability. The key reasoning was that pump and dump scams are inherently difficult for execution-only platforms to detect because the manipulation occurs outside the platform through social media and private messaging, which the platform has no visibility of. Sudden interest in a security, price volatility, and volume increases can appear legitimate in isolation and mirror normal market behaviour such as momentum trading or speculative buying. The ombudsman noted that NASDAQ, as an established and regulated exchange, is primarily responsible for detecting market abuse. There was no evidence that NASDAQ, the regulator, or the company itself raised concerns about OST trading at the time of Mr C's investments. While Platform B did intervene, the ombudsman found this did not establish that Trading 212 should have done the same, particularly given the risks of market interference and negative impact on legitimate shareholders. The ombudsman concluded there was insufficient evidence that Trading 212 should reasonably have formed suspicions of market manipulation or that it lacked adequate systems and controls.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website