The Financial Ombudsman Service has rejected an adviser's claim a client's complaint should be time barred.
Beaufort Securities Limited argued a complaint made by a client, referred to as Mr R, should be time barred as it was made more than three years after he would have become aware he had grounds to complain.
Mr R complained through a claims management company that Beaufort Securities Limited gave him unsuitable advice about share purchases for his equity portfolio and he wasn’t made aware it was selling him shares as principal or the mark-up he paid for this.
Beaufort purchased mostly small cap shares between 2004 and 2007.
Mr R’s personal client profile of 2006 had recorded that he wanted to invest entirely in small cap shares.
But the ombudsman didn't think this accurately reflected how he wanted his portfolio invested, as it wasn't consistent with any other profile of his.
The ombudsman instead thought it was possible the profile reflected what he was actually invested in at the time due to the recommendations made by Beaufort.
Mr R's 2007 and 2008 profiles both showed he wanted his portfolio invested 75 per cent in FTSE 100 shares and 25 per cent in small cap shares, which suggested he wanted less risk than he was exposed to by Beaufort.
The ombudsman felt these profiles were more likely to accurately reflect how Mr R actually wanted his portfolio invested and therefore he had been unsuitable advised to buy shares.
But Beaufort argued Mr R's complaint wasn’t made in time as he had received regular statements about his shares so would have been aware of any issues.
The adviser argued the trades between 2009 and 2011 were execution-only and Mr R had signed a contract which included a signed risk warning declaration agreeing to the terms and conditions and confirming he understood the risks in investing in small cap shares.
The contract also stated that he understood the terms 'principal' and 'agency' and that he agreed to become subject to the terms and conditions.
But the ombudsman ruled despite Beaufort was wrong to think the complaint had been made more than three years from when Mr R was aware he had grounds to demand compensation.
In a final decision, ombudsman Philip Gibbons said: "He only became aware of this when he saw an adviser which was less than three years before he made his complaint."
The ombudsman ruled he wasn’t satisfied the trades were execution-only and whether they were or not wasn't relevant to his decision as they weren’t unsuitable for Mr R's portfolio anyway.
Beaufort was told to compare the performance of Mr R's investment with that of the FTSE All Share index and pay the difference between the fair value and the actual value of the investment.
emma.hughes@ft.com
