Linear Investments Limited, R (on the application of) v Financial Ombudsman Service Limited
[2024] EWHC 1428 (Admin)
Options UK Personal Pensions LLP v Financial Ombudsman Service Limited
20 May 2024
[2024] EWCA Civ 541
Court of Appeal
A pension investor lost money due to a bad investment facilitated by his pension provider. The Ombudsman sided with the investor, and the Court agreed. Even though the provider only handled the paperwork (execution only), they still had to properly check the company making the introduction and the investment itself, and they didn't. The ruling means companies have to be careful, even if they don't offer investment advice.
Key Facts
- •Options UK Personal Pensions LLP (Carey), a SIPP provider, accepted a pension transfer from Mr. Fletcher, facilitated by an unregulated introducer, CL&P, for investment in Store First 'Store Pods'.
- •The Store Pod investment failed, causing Mr. Fletcher to lose his pension funds.
- •Mr. Fletcher complained to the Financial Ombudsman Service (FOS), which upheld his complaint and ordered Carey to compensate him.
- •Carey sought judicial review of the FOS decision, arguing the Ombudsman had erred in his interpretation of legal obligations and due diligence requirements.
- •Carey's operations were 'execution-only', meaning they processed transactions but didn't provide investment advice.
Legal Principles
The Ombudsman must determine complaints based on what is fair and reasonable, considering relevant law, regulations, guidance, and industry practice.
Section 228 FSMA 2000; DISP 3.6.4R
The FCA Principles for Businesses are part of the regulatory framework, and their breach can lead to an Ombudsman finding in favor of the complainant, even if not legally actionable.
FCA Principles; BBA case; Berkeley Burke case
While an Ombudsman is not bound by common law, they must explain their reasoning clearly and justify any departure from relevant law.
Heather Moor case
COBS rules, while actionable, don't override the Principles. The best execution obligation (COBS 11.2) only applies to orders properly accepted.
COBS; Berkeley Burke case
Outcomes
The claim for judicial review was dismissed.
The Ombudsman acted within his statutory powers, considered relevant legal principles and guidance, provided adequate reasons, and did not err in finding Carey had breached its due diligence obligations. The 'execution-only' nature of the contract didn't absolve Carey of pre-contractual regulatory responsibilities.
Similar Cases
Assurant General Insurance Limited, R (on the application of) v Financial Ombudsman Service Limited & Ors
[2023] EWCA Civ 1049
The Financial Conduct Authority v BlueCrest Capital Management
[2024] EWCA Civ 1125
The Financial Conduct Authority v Thomas Seiler & Anor
[2024] EWCA Civ 852
Jonathan Armstrong v The Information Commissioner
[2022] UKFTT 523 (GRC)