This small selection illustrates some of the complaints we have dealt with recently about a wide range of investment matters.

21/5
individual savings account – internet banking – maladministration

Mr and Mrs W decided to switch to internet banking and they opened a joint account with the firm. It sent them a password for logging on to the account. As it was a joint account, they assumed they only needed the one password. In fact, the password was only for Mrs W; Mr W should have received a separate one.

Some time later, Mr W decided to invest in a share-based ISA (Individual Savings Account) before the end of the tax year. Mrs W completed the application for him on-line, using the password the firm had sent. Since she logged on using her name, it was her name that appeared automatically on the application form. She corrected this to show her husband’s name, entered his details and then submitted the application.

When the firm sent her a copy of the application form to sign, she found it was in her name, not her husband’s. She amended the form to show her husband’s name and sent it back right away, unsigned. Despite this the firm set up the ISA in her name.

The time taken to sort all this out meant that Mr W lost the opportunity to invest before the end of the tax year.

complaint upheld
A number of aspects of the firm’s procedures concerned us. First, it failed to tell the couple that they each needed a separate password, and it then only sent them one password. This is why the computer would only recognise and save Mrs W’s name on the application form.

Second, although the computer would save only Mrs W’s name on the application form – not her husband’s – it saved all the other details relating to her husband that she had typed in (National Insurance number, date of birth etc). But at no stage did the firm notice these discrepancies.

Third, the firm went ahead and set up the ISA, even though it did not have signed instructions to do so. In fact, we discovered that it had set up the ISA as soon as it received the on-line application, before it had even sent Mrs W the application form to check and sign. This was particularly worrying bearing in mind that the system had automatically changed the applicant’s name.

Then, the firm ignored the fact that Mrs W had sent back the form, pointing out that her husband’s name should have been on it – not hers.

We required the firm to refund the difference between the amount the investment was worth by the time the firm cancelled it, and the amount it would have been worth, had the firm set it up correctly when asked to do so. We asked the firm to add to this an amount of interest, calculated at our normal rate.

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21/6
savings endowment policy – cancellation by firm as premiums not paid

Mr and Mrs C took out a savings endowment policy in May 1992. They were expecting the policy to mature in May 2002, so they contacted the firm when they had heard nothing by the end of that month. The couple were shocked when the firm told them that their policy had lapsed, without value, in November 1992. The firm said this had happened because the couple had stopped paying the premiums.

Mr and Mrs C were very concerned that the firm had never told them the policy had lapsed. They insisted that they had not cancelled the standing order for the premiums.

The firm was unable to establish exactly what had happened or whether it had written to the couple about the premiums. It was only obliged to keep its records for six years after the end of a contract, so it no longer had any details of the couple’s policy or of its correspondence with them.

complaint rejected
We explained to Mr and Mrs C that the onus had been on them to ensure they paid the premiums for their policy. We thought they should have noticed that they had not been paying their premiums for 10 years. We did not consider that they had suffered a loss, since they had the benefit of the money they would otherwise have paid in premiums.

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21/7
spread betting – breach of agreement by customer

Mr U opened a spread betting account. Spread betting is a risky activity that, essentially, involves betting on future events such as the movement of a financial index or the outcome of sporting fixtures. 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.

The account had only been open a short while when the firm contacted Mr U to say that he had already exceeded his margin (credit limit) and that it required full payment of the amount outstanding.

Mr U telephoned the firm and, after discussing the situation, paid enough to reduce the amount he owed to below his margin. He believed this would enable him to keep his bets open, and he said that the firm had agreed to this. So he had been very annoyed when the firm cancelled his bets on the grounds that he had not paid off all of the amount outstanding. It asked him to pay the balance immediately.

Mr U refused, believing that the company had backtracked on an agreement. The firm denied ever having agreed to his paying off only a part of the amount he owed.

complaint rejected
The firm sent us a tape recording of the relevant telephone conversation with Mr U. This established that Mr U’s version of events was incorrect; no agreement had been reached and the firm had asked for full payment. The firm’s terms and conditions entitled it to ask for full payment and to cancel his bets if he did not pay up.

Mr U did not accept our view of the matter and, complaining that we had considered his case too quickly, he asked for it to be passed to an ombudsman for a final decision. The ombudsman upheld our initial view.

The firm then decided to take Mr U to court to recover the debt. Mr U refused to accept that the firm had acted correctly. However, shortly before the case came to court, he finally agreed to pay the amount he owed.

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21/8
loss of share certificate – delay in issuing letter of indemnity

In early August 2001, Mrs T decided to sell some of her shares. She thought she had sent the firm all the necessary paperwork. But it told her it could not carry out her instructions as she had not sent the share certificate. She was sure that she had sent the certificate, but the firm had no record of receiving it.

The firm said it would send her a letter of indemnity to sign and return. It would then be able to use this in place of the certificate and sell her shares. But when Mrs T still hadn’t received the letter of indemnity by 14 August, she wrote to the firm. It replied, saying that the indemnity it had sent her on 8 August must still be on its way to her. Mrs T was reluctant to wait, so she asked the firm to go ahead and sell her shares, using her letter telling it this in place of the indemnity.

The firm wrote back saying that it could not do this and that she would have to sign and return its letter of indemnity. But Mrs T was away on holiday, so she did not receive this response until 6 September. She then asked the firm to send her a replacement letter of indemnity, as the original had never arrived.

The replacement did not reach her until 19 September. By this point, the shares had gone down considerably, largely because of the events of 11 September. Mrs T asked the firm to sell the shares using their pre-11 September price.

complaint upheld
We did not think the firm had any responsibility for the loss of the original certificate, as Mrs T had no proof that she had sent it to them. And we did not feel that the firm was responsible for her not receiving the first letter of indemnity.

But we did conclude that when it received Mrs T’s letter of 14 August, the firm should have issued a replacement letter of indemnity right away. If it had done this, it could have sold her shares well before 11 September.

We asked the firm to sell Mrs T’s shares at their 10 September price. As a goodwill gesture, it also agreed to bear the charges incurred in obtaining the letter of indemnity.

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21/9
mortgage endowment policy – firm’s failure to establish affordability after customers’ retirement

Mr and Mrs G’s complaint concerned the advice they were given to take out an additional mortgage endowment policy when they needed £34,000 for home improvements. The new policy was set up on an 18-year term and it finished three years after Mr G retired at the age of 65.

The couple claimed that the adviser had told them the policy would produce enough to pay off all of the additional borrowing when Mr G retired.

complaint upheld
We found that the adviser had made no attempt to establish how the couple would be able to afford the premiums and the interest payments after Mr G retired.

The firm accepted liability and agreed to calculate compensation in line with Regulatory Update 89. It did this on the assumption that the couple should have been sold a policy with a shorter term, that matured on Mr G’s 65th birthday.

The firm ignored any notional ‘savings’ that the couple had made as a result of having a policy with a longer term. It also provided replacement life cover at the price it would have cost when the couple took out the additional endowment. Finally, the firm paid the fee the couple were charged for switching to a repayment mortgage and paying off a lump sum from the outstanding capital.

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