Not upheld: Irresponsible lending complaint against Hargreaves Lansdown Asset Management Limited

Decision detail

Summary

Mr W complained that HL failed to identify and protect him from potentially detrimental trading patterns indicative of gambling addiction, resulting in over £1 million in losses across three accounts. Mr W argued HL should have taken action from 2017 onwards, particularly after the FCA's 2021 vulnerable customer guidance, rather than waiting until June 2024 when there was little money left. HL argued it was an execution-only platform with no obligation to prevent trading and that Mr W had declared knowledge of high-risk investments. The ombudsman found HL should have identified potentially detrimental trading earlier (from June 2018 onwards) and taken some proactive steps to flag losses and invite support, but would not be fair to say HL should have identified Mr W as a problem gambler or prevented trading. Critically, the ombudsman found earlier intervention would likely not have changed Mr W's behaviour, as evidenced by his continued trading after the May 2023 communication and subsequent detrimental trading with other providers. The complaint was not upheld and no compensation was awarded.

The Ombudsman's reasoning

The ombudsman found that while HL had regulatory obligations under Principles 2 and 6 and COBS 2.1.1R to conduct business with due skill, care and diligence and treat customers fairly, these obligations must be viewed in context of the execution-only service provided. HL's Terms and Conditions made clear it was not providing safeguards against losses and Mr W had declared knowledge of high-risk investments. However, HL should have been proactively identifying obvious potential consumer detriment throughout the period, not just after introducing new policies in 2023/2024. The ombudsman found HL should have identified potentially detrimental trading (characterized by unusually high volume, high losses, and high charges) from June 2018 onwards. However, it would not be fair and reasonable to say HL should have identified Mr W as a problem gambler or prevented him from trading. Any earlier action should have been limited to flagging losses and inviting Mr W to seek support. Critically, the ombudsman found such earlier communication would likely not have changed Mr W's behaviour, as evidenced by: (1) Mr W continuing to trade significantly after the May 2023 communication; (2) Mr W's awareness of losses but continued frequent trading; (3) Mr W subsequently opening accounts with other providers and continuing detrimental trading despite their warnings; and (4) no evidence Mr W sought help for gambling addiction even after the June 2024 communication. The ombudsman concluded Mr W would likely have continued trading similarly either through HL or other providers regardless of earlier intervention.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website