Not upheld: Investment mis-selling complaint against CMC Markets UK plc

Decision detail

Summary

Mr B complained to the FOS that CMC Markets UK plc failed to pay amounts due under a commission sharing agreement with Mr D (a CMC employee), improperly categorised him as a professional client, provided unsuitable advice, unfairly induced him to trade through gifts and mark-ups, refused to close his accounts, failed to identify gambling difficulties, and prevented him from complaining. The ombudsman found that while a contract likely existed between Mr B and Mr D, CMC was not bound by it because Mr D lacked actual or apparent authority to enter into such agreements on CMC's behalf, as evidenced by CMC's code of conduct prohibiting staff from offering financial benefits to clients without approval. The ombudsman rejected all other complaints, finding no evidence of unsuitable advice, unfair inducements causing detriment, improper professional client status elevation, wrongful account closure, or genuine gambling vulnerability disclosure. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman applied contract law principles to determine whether CMC was bound by the CSA. On actual authority, the ombudsman found CMC's code of conduct explicitly prohibited Mr D from offering financial benefits to clients without prior approval, and required financial independence from clients. On apparent authority, the ombudsman applied the four-limb test from Freeman & Lockyer and found all three relevant limbs failed: (1) no representation by CMC that Mr D had authority; (2) Mr D's role as account manager insufficient to evidence authority to enter CSAs; (3) Mr B lacked sufficient reliance on any representation given the circumstances suggested a personal arrangement between Mr B and Mr D, not with CMC. The ombudsman noted Mr B's experience in the financial sector meant he should have been aware of restrictions on Mr D's conduct and should have verified Mr D's authority with CMC directly. On advice, the ombudsman found communications amounted to market commentary and information provision rather than personal recommendations. On inducements, while some hospitality may have breached COBS rules, Mr B was not detrimented as other factors (trading volume, commission expectations, industry involvement) were stronger drivers of his trading. On professional client status, the ombudsman found CMC properly assessed Mr B against COBS 3.5.3 requirements and followed correct procedures. On account closure, the ombudsman found the request was made due to temporary deposit difficulties which CMC was resolving, and Mr B was not unfairly persuaded to revoke it. On gambling, the ombudsman found the November 2018 message was exaggeration rather than a genuine disclosure of gambling addiction, and Mr B's continued trading volume suggested he was not in financial difficulty. The ombudsman found no evidence of complaint blocking.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website