Options UK Personal Pensions LLP, R (on the application of) v Financial Ombudsman Service Limited

The Financial Ombudsman Service may determine complaints by reference to what is fair and reasonable, taking account of relevant law, regulations, regulatory rules, guidance, codes and good industry practice. It may rely on both actionable and non-actionable regulatory provisions. A departure from relevant law or guidance must be explained, but that obligation is not engaged merely because the decision considers non-actionable rules or principles. A judicial review challenge which amounts only to disagreement with the Ombudsman’s expert assessment is a merits challenge. An oral hearing is required where disputed factual issues cannot fairly be resolved without one; an inquisitorial investigation may suffice where the facts have been fairly and sufficiently examined.

Carey, a SIPP provider, sought permission to challenge by judicial review a final decision of the Financial Ombudsman Service upholding Mr Fletcher’s complaint. The Ombudsman found that Carey had failed to carry out sufficient due diligence on the unregulated introducer CLP and the Store First investment, and directed compensation for Mr Fletcher’s loss and trouble and upset.

Carey argued that the Ombudsman had imposed unrecognised duties, failed to give adequate reasons, acted irrationally and unfairly refused an oral hearing. The central issues were the scope of the Ombudsman’s fair-and-reasonable jurisdiction, the significance of actionable and non-actionable FCA rules and principles, the adequacy and rationality of the decision, and the circumstances requiring an oral hearing.

1. Permission refused. None of the proposed grounds disclosed an arguable error of law, irrationality or procedural unfairness.
2. Under sections 228 and 229 of the Financial Services and Markets Act 2000, the Ombudsman determines complaints by reference to what is fair and reasonable in all the circumstances and may award fair compensation. DISP 3.6.4 R requires consideration of relevant law and regulations, regulatory rules, guidance and standards, codes of practice and, where appropriate, good industry practice.
3. The duty explained in Heather Moor & Edgecomb to explain a departure from the law does not turn on whether a rule is actionable. The Ombudsman must consider relevant legal and guidance materials, whether actionable or not. An explanation is required where a complaint is upheld despite compliance with those materials, but that was not the present case.
4. The Ombudsman was entitled to take account of COBS 2.1.1R, the FCA Principles for Businesses and good industry practice when assessing Carey’s due-diligence obligations. The similarity and overlap between COBS 2.1.1R and Principle 6 explained why the decision did not draw a sharp distinction between them. The approach was consistent with R (BBA) v FSA and FOS and R (Berkeley Burke SIPP Administration Ltd) v FOS.
5. The reference to Adams v Options UK Personal Pensions LLP did not assist Carey. The alleged due-diligence breach had not been pleaded or decided on the appeal in that case, so there was no inconsistency.
6. The Ombudsman gave sufficient reasons for the steps expected by way of due diligence. The challenge to the expert assessment of those steps, including the assessment of the investment and introducer, was a merits challenge and did not meet the high threshold for irrationality.
7. Under DISP 3.5.5 R, an oral hearing is required only if the complaint cannot fairly be determined without one. The process was inquisitorial, the relevant questions had been put to Mr Fletcher, and no unresolved factual dispute required oral evidence or cross-examination. In any event, compliance with Carey’s duties would have prevented acceptance of the application, so Mr Fletcher’s intentions would not have altered the outcome.