Court rejects application for JR review of FOS decision

The Court has dismissed an application made by Linear Investments Limited for judicial review of a FOS decision. The FOS had heard that a customer of Linear (Professor W) was an eligible complainant under its rules, because he was a consumer in relation to the activity to which his complaint related. Linear had categorised him as an elective professional client, but the FOS held that this categorisation was incorrect.

Professor W had had a managed discretionary advisory account with Linear, which acts only for professional clients, and categorised Professor W as an elective professional. When Professor W ended the client relationship, he complained, among other things, that Linear had used misleading contractual terms in the client agreement in seeking to exclude a right of complaint to the FOS. He also complained about other misleading information and mismanagement of his account. He complained to the FOS, seeking to be put back in the position he would have been in had he not invested with Linear.

The Ombudsman’s provisional decisions confirmed that Professor W was an eligible complainant, upheld his complaint and suggested what Linear should do to compensate him for his losses.

The Assurant case had recently confirmed that, when appealing an Ombudsman decision, a court must look at whether its application of the law to the facts was wrong, not whether it was reasonable. The Ombudsman had looked at the process Linear used to assess whether clients could be elective professionals and found that what was a relatively common “tick box” approach would not have been enough to get satisfactory information – and it also found that Professor W satisfied only one of the conditions for the COBS quantitative test when he would have needed to satisfy 2. As a result, the Ombudsman said that if Linear had taken adequate steps to classify him, it was more likely than not it would have concluded he should not be classified as an elective professional. Having decided this, the Ombudsman also thought it more likely than not that Professor W had been misled into investing into something described to him as medium risk but which was in fact a high risk investment.

Despite protestations by Linear, the court found the Ombudsman had used facts to come to its conclusion. Additionally, it noted some inconsistencies in Professor W’s responses to the classification assessment process that appeared to display his lack of sophistication in certain products and should have made Linear raise further queries. The court dismissed all grounds of the claim for judicial review.


Emma Radmore