A mortgage adviser may have to close his firm after being ordered by Fos to return £90,000, as well as interest, to a client for money she lost as a result of a decision to invest in Bulgaria.
Graham Lockstone, from Somerset-based EMS (Express Mortgage Solutions), said he was asked to remortgage the client’s residence in 2009 to raise funds so she could invest in buy-to-let property.
Mr Lockstone fast-tracked his client with Halifax. However, Mr Lockstone said that unbeknown to him the client - an accountant - invested all of her money into an unauthorised Bulgarian property investment scheme.
The investment failed and in 2014 the client made a complaint stating that if Mr Lockstone had not done her remortgage, she would not have lost her money.
In April, Fos upheld the client’s contention that Mr Lockstone had submitted income to Halifax that was “substantially higher” than the income declared. She therefore claimed the mortgage was unsuitable. Mr Lockstone said she had claimed to have income from “various sources”.
Fos decided it was unlikely that a lender would have given the client a loan of five times her annual income. It said Mr Lockstone should have ensured the mortgage was suitable and ordered him to refund the £90,000 that she invested and lost.
He said: “All I was asked to do was raise some money. She’s an accountant. She knew what she was doing. She chose to put her £90,000 into Bulgaria.”
Mr Lockstone appealed to Fos but the original adjudicator’s decision was upheld in October, and he now faces having to close his business or go into debt.
But Mr Lockstone - who for the past 30 years has been a mortgage broker with insurance authorisation, has never advised on investments, and said he was unaware she intended to put all her money into Bulgarian property.
According to the FCA’s website, Mr Lockstone does not have the CF30 authorisation which would allow him to advise on investments.
Mr Lockstone has since approached a business debt management firm because his PI will not pay out because he did not let them know initially about the complaint, which he thought originally could never have been a serious claim. He said: “I didn’t believe it was going to go beyond a couple of letters.”
Mr Lockstone said his only other option was to take his case to the European Court of Human Rights. He added: “I feel stuck out on a limb. I’m being blamed for a client’s investment. This now sets a precedent in that if you raise money on a mortgage and the client has wasted it in a failed investment, they could claim against the broker. It’s unjust.”
Right to reply
In the original 6 April decision, Fos said: “The client was looking to remortgage her home through EMS. Her IFA had advised her to borrow additional money through the remortgage for a foreign investment opportunity.
“The investment has failed and the client feels the £90,000 she invested should be refunded. The complaint is not about the advice given to her by the IFA; it is about whether the actions of EMS in placing this application for a remortgage with Halifax caused her financial detriment.”
