Case Studies - Complaints about other types of investment

The following two cases indicate the wide range of investment matters we deal with. Case studies

We dealt with this complaint about an IMRO-regulated firm under the rules of the Office of the Investment Ombudsman.

02/09
Mr E had windfall shares in a Personal Equity Plan (PEP) with company A. He issued instructions by telephone to transfer his funds to company B, and complained when he subsequently discovered that he had been charged for the transaction. His main allegation was that his shares were immune from charges as they were windfall shares. He also felt it was significant that the charges were not mentioned to him when he telephoned his instructions. At the time company A had demutualised, it had offered a free share dealing service. At our request, it produced copies of the documents it had sent to everyone who received these windfall shares, including Mr E. The documents stated that, as a special concession, recipients of windfall shares could dispose of them without charges, up to April 1999. Details were given of the charges which would apply after that date. We therefore did not consider company A had been obliged to draw Mr E’s attention to the charges when taking his telephone instructions. We did not uphold the complaint.

This case involves an SFA-regulated firm and was dealt with by the SFA Complaints Bureau. It concerns spread betting, an activity which is regulated under the Financial Services Act 1986.

02/10
Essentially, spread betting involves taking a bet on future events, such as the movement of financial indices (the FTSE, NASDAQ etc) or on the outcome of sporting fixtures. It is a form of gambling which has become increasingly popular in the past few years. However, it is a high-risk activity and not for the inexperienced.

Unlike conventional gambling, you can lose more than your original stake. And you are legally obliged to pay up, no matter how much you lose. Before you enter into a spread betting contract, you are required to sign an agreement acknowledging the terms and conditions of the firm concerned.

Company C is regulated by the SFA and conducts spread betting, taking bets by telephone. Their client, Mr F, placed a bet on how many wins there would be in home games, as opposed to away games, in the English Premiership Football League. In fact, the firm only quotes for home/away goals, not home/away wins. So the bet would be on how many more goals would be scored in home matches than in away matches.

Mr F guessed wrongly and ended up owing the company £2,500. He complained that he had misunderstood the nature of the bet and had thought he was betting on wins, not goals.

When we examined the tape-recording of the telephone dealing conversation (often an essential element in complaints involving equities, derivatives and spread betting), we found that both the client and the dealer referred to ‘homes over aways’ but never specifically mentioned ‘wins’ or ‘goals’. Each assumed he knew what the other meant.

The firm’s terms and conditions, which Mr F had signed up to, state that they do not quote for bets on home/away wins. They also state that before customers place any bets, they must familiarise themselves with the nature of spread betting, the jargon used, the market/index hours and the expiry times and dates of the contracts made.

Mr F has reluctantly agreed that he should have ensured he understood the details of the bet he was placing. He has now paid the company the amount outstanding.