The High Court has refused a renewed application by Charles Street Securities Europe LLP for permission to apply for judicial review of a FOS decision made in February 2021. The dispute focused on whether Mr R, a client of the firm and its AR, was an eligible complainant for the purposes of FOS rules. The firm had classified Mr R as an “intermediate” customer under the then COBS requirements, which, after implementation of MiFID, had transitioned to being an elective professional client where – as was the case with Mr R – the client had been assessed on the basis of experience and understanding. If the classification was correct, Mr R would not be an eligible complainant.
Mr R had complained to FOS that he had lost money on over £640,000 that he invested in shares of unlisted companies between 2006 and 2009, saying the investments had not met his stated objectives. FOS upheld the complaint and made an award of the then statutory cap, which Mr R accepted.
The firm then applied for judicial review.
The Ombudsman had held that it was not for her to determine whether the classification was correct, but was rather to assess whether the firm had complied with regulatory requirements in making the classification. She found that the firm had complied with all relevant procedural requirements, but that it had not met the test of taking “reasonable care” to determine whether Mr R had the requisite experience and understanding. She stuck to this view regardless of the fact that Mr R may well have deliberately given inaccurate information – and she acknowledged the firm did not need to go behind those written assurances.
The High Court held in favour of FOS. It said 3 of the grounds of challenge amounted to a challenge to the Ombudsman’s factual assessment. The Court was not persuaded that the Ombudsman had misunderstood the relevant test or was imposing too high a standard. A new, additional, ground, raised in the application was that the Ombudsman should have taken an objective assessment of whether the categorisation had in fact been correct – which was a conclusion she did reach. Counsel for FOS submitted that there was no good reason why this ground had not been raised earlier, and that therefore it should not be allowed. The Court agreed.