The Financial Ombudsman Service has ruled that a complaint against Lighthouse Group can go ahead after the firm argued it should be time-barred, in one of many decisions sitting with the ombudsman in relation to legacy unregulated investment scheme recommendations.
Earlier this year, FTAdviser revealed Lighthouse Adviser Services was contesting dozens of claims brought through Fos relating to more than £5m worth of unregulated investment schemes sold by a single adviser, who alleged the fault lay with network compliance.
Complaints related to one former adviser, Nick Barnett, who became part of Lighthouse following its merger with the parent of his previous authorised principal firm, Falcon Group, in 2008.
Lighthouse fought the claims on a number of fronts, including arguments that some should be time-barred as they came more than six months after it issued a final decision.
However, the Fos has ruled in the first of many cases that the complaint can go ahead, stating that a 2013 email sent to the Falcon Group by a disgruntled investor constituted a complaint. The complaint stems from advice given in 2005 to invest £200,000 into an unregulated collective investment scheme.
When it was first brought to the Fos, Falcon Group objected to an investigation stating that the complaint had been brought more than six years after the event complained about and more than three years after the investor “ought reasonably” to have become aware they had cause for complaint.
On 16 July 2013, the investor “intimated” that they wished to make a complaint about the advice they had received, but Falcon argued that the content of the email did not constitute a complaint.
The ombudsman ruled that this should have been recorded as a complaint. It cited the FCA’s glossary definition which says “any oral or written expression or dissatisfaction, whether justified or not... about the provision of, or failure to provide, a financial service” constituted a complaint.
Specifically, the investor’s email told Falcon it wanted the advice to be “reviewed” and referred to the possibility that “further complaints may be triggered”, which the ombudsman said indicated the email was a complaint.
However, Falcon argued that the consumer “reasonably” should have been aware they had cause for complaint by June 2010, as the investment had seen a near 16 per cent drop in value since the previous year. It said the complaint was not brought until August 2013.
The Fos concluded the fall in value would not have justified a complaint about the advice given. Despite a 16 per cent loss, the value of the investment was still £35,600 above the original level. Furthermore, according to Falcon’s documentation, the consumer had a “high attitude to risk”, therefore such volatility would not have been outside expectations.
However, Falcon said a letter from the investment managers to the investor dated 14 July 2010 ought to have caused the investor to complain. The letter referred to volatility in the price of the fund due to weaknesses in the German job market, and a specific risk that the loan-to-value ratio of the fund might be breached in the following year without action from the investment managers.
Fos said the letter would not have given cause for concern due to its “tone” and it did not suggest any action was necessary. It added that for a higher risk investor, the update would not have given cause for complaint.
The complaint came about due to the investor stating their attitude to risk was not high and they were not prepared to “risk the entirety of its capital”. The ombudsman added that given the investor’s “investment history”, there was “some preference for risk and the capacity to take it”.
The decision concluded: “As I have concluded that the case is a complaint that we are able to investigate under our rules, I will now pass the file back to the adjudicator for that investigation work to be begin.”
Lighthouse declined to comment. The Fos could also not confirm how many cases it is currently looking at involving the Falcon Group.
donia.o’loughlin@ft.com
