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IFA firm overturns FOS execution-only ruling

An IFA firm has overturned a Financial Ombudsman Service provisional decision to uphold an execution-only bond complaint against it after convincing the Ombudsman no advice had been given.
The FOS originally said it was minded to uphold the complaint on the basis the client lacked the sophistication to invest in such a product without advice.
But the firm-who prefers not to be named- was granted a hearing after convincing the FOS a number of external circumstances existed that called into question the ombudsman’s initial view.
The firm produced evidence showing the commission number on the proposal form had been manually adjusted- meaning the client had received the form from another firm.
Secondly, the customer had also produced a list of investments in her husband’s handwriting when she met with the adviser.
Thirdly, the client had bought a similar product at the same time from a different source, another execution-only broker, which she had complained about to the firm.
The decision said: “If the various plans had genuinely been transacted on [an execution only] basis then the firm did not have a duty to explain the ramifications of investing in the products or advise as to their suitability (which would include the risk of such products). .. I do not believe the ‘neighbour principle’ is correctly applied here where this is a ‘mere’ financial transaction, especially as I now accept… that the firm disclosed that it was not providing advice.”
The Ombudsman had earlier commented after the hearing: “The weight of the evidence that indicates that Mr and Mrs X could deal with investments on their own and choose different firms through which to process them… means that it would no longer be sound to reach a decision that these transactions were not genuinely ‘execution only’”.
Compliance consultant Adam Samuel, who helped the firm with this case, says: “The key to this case is that the firm produced external evidence to support its execution-only claim. The fact that the customers had received material about the products from another firm and the separate transaction that did not go through the IFA’s books was crucial.
This decision does not disapply the usual assumption that customers receive advice before transacting business. It merely indicates that with the correct use of documentary evidence and an IFA who is telling the truth at the hearing, the firm can win these cases where it genuinely did not give advice.”


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