Quinn v IG Index Ltd

For an execution-only spread-betting service, the appropriateness assessment concerns whether the client has the knowledge and experience needed to understand the product’s risks. It does not require assessment of the client’s competence, success or likely profitability. A firm need not reassess appropriateness for every transaction. However, closure of an account ends the existing course of dealings, so a new assessment is required before the service is resumed. The client’s best-interests rule does not generally require a firm to prevent a client from entering transactions that have been assessed as appropriate, or to protect the client from self-inflicted economic loss. A breach gives rise to recovery only where the claimant proves loss caused by it.

The claimant lost more than £2 million through spread betting with the defendant between 2010 and 2014. He alleged breaches of COBS 10.2.1R and COBS 2.1.1R, relying on failures to assess or reassess appropriateness, failures to warn, and conduct said to have encouraged him to resume or continue high-volume trading.

The defendant accepted that an unauthorised upgrade from a Plus account to a Select account occurred without a further assessment, but disputed breach otherwise and denied causation. The central issues were the scope of the appropriateness obligation, the relationship between COBS 10 and the best-interests rule, and whether any breach caused the losses claimed.

1. Claim dismissed. The claimant established a breach when the defendant upgraded him from a Plus account to a Select account without a further appropriateness assessment. The claimant neither pleaded nor proved loss caused by that breach.
2. COBS 10.2.1R requires assessment of the client’s knowledge and experience relevant to the specific product or service, so as to determine whether the client understands its risks. It does not require assessment of expertise understood as competence, success or profitability. The wording of COBS 10, including COBS 10.2.2, 10.2.6–10.2.8 and 10.4.2R, supported that limited construction.
3. COBS 10.4.2R means that a firm need not reassess appropriateness for every transaction. But where an account has been closed at the client’s request, the course of dealings has ended. Reopening the account or starting a new account therefore requires a fresh assessment. The firm may rely on existing information under COBS 10.2.4R and 10.2.5G, subject to the rule concerning information that is manifestly out of date, inaccurate or incomplete.
4. COBS 2.1.1R requires the assessment to be performed honestly, fairly and professionally in accordance with the client’s best interests. It does not impose a general duty to prevent a retail client from undertaking execution-only transactions assessed as appropriate, or a broad duty to protect the client from self-inflicted financial loss. Nor did the evidence establish a breach of any narrower duty not to encourage a known problem gambler or a client gambling beyond his means.
5. The defendant’s marketing, hospitality, market information and credit arrangements did not cause the claimant’s trading. Even assuming a breach requiring closure or refusal to reopen, the claimant would probably have obtained facilities from other spread-betting providers and traded in the same way. Accordingly, the statutory claim under s 138D(2) of Financial Services and Markets Act 2000 failed for want of causation.