However, the UK based advisory company said it had rejected the client's initial complaint on the basis that the investor involved had sufficient financial knowledge to understand the risks of what he was investing in at the time.
The client, referred to as “Mr H”, met with an adviser from Chase in March 2007. During the review, an attitude to risk analysis identified the client as having a six out of 10 rating, which is categorised as “more than moderate”.
As a consequence, investment into four specific funds was recommended, three of which were: Premier Diversified Property (£100,000), Premier Property Options (£15,000) and Matrix Bastion (£30,000). All funds were unregulated collective investment schemes (UCIS).
Both the Premier property funds are currently closed to redemptions, while the Matrix Bastion fund of hedge funds was closed shortly after the collapse of Lehman Brothers in 2008.
When the funds failed, the client initially complained directly to Chase that the advice he was given was “negligent”. One of his main concerns was that there had been an inadequate assessment of his risk profile which led to the investments.
Chase dismissed his complaint, arguing that his position within the financial services industry, meant he had appropriate investment experience and that the poor performance of the funds, did not necessarily mean they were unsuitable.
International Adviser understands the client was non-executive director of an advisory company at the time of the advice.
However, the client was dissatisfied with Chase’s decision and brought a complaint to the FOS which was upheld on the basis Mr H was exposed to an “unnecessary level of risk” and that the role he held “did not qualify him as an experienced/suitable investor”.
Chase went on to appeal the adjudicator’s findings, but has again been ruled against, with the FOS stating the company must now pay Mr H compensation which will “put Mr H as close to the position he would probably now be in if he had been given suitable advice”.
During the unsuccessful appeal, Chase pointed out that in another case brought against it by Mr H, the FOS did not uphold the client’s complaint as he was considered an experienced investor, meaning it would be suitable to advise him on UCIS products.
In rejecting the Chase’s appeal, the FOS addressed this concern, stating that “each case was viewed on its merits and the decision under a previous case did not have to influence the decision now being made”.
A spokesperson for Chase said: “We rejected the initial complaint because of the financial suitability of the investor, who knew what they were doing and had significant involvement in financial services industry.”
In addition to restoring the client to his previous financial state, the FOS ruled Chase must also pay Mr H £200 “for the distress and inconvenience caused”.
