Robert Day v Forex Capital Markets Limited
[2023] EWHC 1349 (Comm)
IG Index Limited v Robert Tchenguiz
31 July 2024
[2024] EWHC 1880 (Comm)
High Court
A company sued a client for money owed on a betting account. The client said the company broke the rules by changing his account type, which meant he lost protection from huge losses. The judge said even if the company broke the rules, it didn't make the debt disappear, and the client should have sued for damages if he wanted to challenge the account change.
Key Facts
- •IG Index Limited (IG) sued Robert Tchenguiz for £6,549,430.34 plus interest, the balance due on a closed spread betting account.
- •Tchenguiz denied liability, arguing IG wrongly reclassified him as an Elective Professional Client (EPC), depriving him of negative balance protection (NBP).
- •As an EPC, Tchenguiz was not entitled to NBP, which protects retail clients from liability exceeding account funds.
- •Tchenguiz claimed IG's reclassification breached the Conduct of Business Sourcebook (COBS) rules 3.5.3R and 3.5.6R.
- •The key issue was whether IG took all reasonable steps to ensure Tchenguiz met the qualitative and quantitative tests for EPC status under COBS.
Legal Principles
A firm may treat a client as an EPC if it complies with an adequate assessment of the client's expertise, experience, and knowledge, and follows a specific procedure.
COBS 3.5.3R
Before accepting a request for EPC reclassification, a firm must take all reasonable steps to ensure the client satisfies the qualitative and quantitative tests.
COBS 3.5.6R
A retail client's liability for restricted speculative investments is limited to account funds (NBP).
COBS 22.5.17R
Contravention of FCA rules is actionable if a private person suffers loss, but does not make any transaction void or unenforceable.
FSMA 138D(2), 138E(2)
Outcomes
IG's claim succeeded.
The court found IG complied with COBS rules 3.5.3R and 3.5.6R in reclassifying Tchenguiz as an EPC. Even if a breach had occurred, FSMA section 138E(2) prevents the transaction from being void or unenforceable. Tchenguiz's failure to bring a counterclaim for damages was also a factor.