The Court has found against FOS in a judicial review hearing brought by a forex firm.
TF Global Markets (UK) Ltd has suspended a number of accounts, including those of three individuals who subsequently complained to FOS. The firm contended that various clauses in its client T&Cs relating to market abuse enabled it to prohibit arbitrage based on price latency. It said while this was not unlawful behaviour, it regarded it as unfair and therefore its T&Cs were designed to allow it to stop the practice.
The first complainant to FOS had his complaint rejected by a FOS adjudicator, and then referred the complaint to an Ombudsman who overturned it. Essentially the Ombudsman held that it was no more than a possibility the customer had conducted abusive trading and that, therefore the firm did not have the right to suspend his trade or accounts. There was a similar pattern on two further complaints.
The firm applied for judicial review of the decisions. It said its T&Cs allow it to exercise judgment as to whether arbitrage based on price latency has taken place, and merely must not use that discretion arbitrarily, capriciously or unreasonably. FOS contended the discretion only arose if arbitrage based on price latency had in fact taken place. The firm said the FOS had wrongly construed the terms of the contact and that the Ombudsman had exceeded the constraints of his role.
The Court held that the Ombudsman had erred in his Final Decisions and quashed the decision letters, but said it was not for the court to determine whether the firm had exercised its judgment reasonably, so the matter needs to go back to FOS for it to consider whether, in each case, the firm exercised its discretion reasonably. This would involve the Ombudsman looking at the evidence available to the firm at the time in detail.