Capital Com (UK) Limited · DRN-6207714

The complaint Mr Z’s complaint, in essence, is that Capital Com (UK) Limited (“Capital”) allowed him a trading account that wasn’t appropriate for him. He complains Capital ought to have identified health conditions he had that later impacted his ability to make trading decisions – and ought to have identified shortcomings in his financial literacy. He also complains Capital’s platform didn’t adequately explain its CBOE Volatility Index product (“VIX”), including its overnight funding costs, or its product for trading the US dollar and Japanese Yen exchange rate at weekends (“USD/JPY_W”). Background and circumstances My provisional decision of 20 January 2020 set out background and circumstances relevant to the complaint in the following terms: Background and circumstances Mr Z applied for a Capital trading account which opened at the end of August 2021. He answered some questions on the basics of trading, funding a trading account and working out the margin needed for a leveraged trade. He told Capital he was educated to degree level (he’d left University by July 2021), was unemployed with income of less than £25,000 from savings, had wealth of less than £25,000 and was willing to invest less than £1000 in his trading. He told Capital he wanted to trade for speculation, and he recognised he might lose money when making speculative investments. On the questionnaire Mr Z completed for Capital’s appropriateness test, he also told Capital he had traded CFDs (‘contracts for difference’) on shares, indices, commodities or currency pairs in more than 30 trades in the past three years. Capital deemed the trading account appropriate for Mr Z, based on his answers. Mr Z has told us of an illness he had around eight years before he opened his account with Capital – and he has sent us a medical record to confirm this. He says physical damage from this led to ongoing difficulties with concentration and focus - making it challenging to process complex information effectively where this needed sustained mental effort, such as analysing financial data and assessing investment risks. He says the illness led to other side effects, symptoms and conditions, increasing his cognitive and emotional challenges. Mr Z says a further, and one of the most significant, results of the illness was a mental health condition he has sent documents showing he was diagnosed with in April 2021. He says this condition significantly impacted his ability to navigate stressful situations, including financial decision-making. Mr Z says the combination of his conditions and symptoms was a vicious cycle, compromising his functioning. Records note in April and July 2021 an issue requiring surgery in November 2021. A December 2021 email shows Capital knew of that surgery. Between 30 and 31 August 2021 Mr Z opened and then closed positions in Hong Kong,

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Chinese and US tech stocks and in the Volatility Index – making in the region of £500 on the Chinese stocks and £140 on the Volatility index (with his other results not being noteworthy). Capital’s representative phoned Mr Z on 30 August 2021 to introduce himself and ask Mr Z how his trading was going. Mr Z said the call would need to be rescheduled as he was too busy but he thanked Capital for the call. Capital emailed Mr Z on 31 August “to see if there is any assistance I can offer to help you”. In reply Mr Z asked Capital to refund his Volatility trade above, saying “Is it possible to request your help to compensate for the unintended ticket below? I am not sure why this costs more than 10% of my investment at the start of this entry and I don’t find this affordable to trade.” Capital said this wasn’t possible. It said: “The P&L straight after the trade is the realised spread fee on the position size you have executed. Our costs are very competitive across the board including on this product… I recommend that moving forward if trading a product for the first time, look at the spread cost and try a small test trade first. Thankfully I can see currently the position is now in profit.” Between 30 August and 24 September 2021 Mr Z had positions in two overseas stocks I’ll call A and Z. The swap fees were in the region of £2100 in total in that period. He closed Z trades during the period gaining £500 and closed others with a ‘take profit’ on 10 September of £1200. He also reopened and increased his positions during the period. His positions were closed out on 24 September losing around £36,300 in Z and £28,000 in A at that time. These large losses were due to directional changes – as Mr Z’s trades would’ve gained if the share prices had increased but the share prices decreased instead. The vast bulk of Mr Z’s losses on these instruments were due to these decreases rather than overnight swap fees. Between 11 and 14 October 2021 Mr Z opened and then closed positions in a UK stock I’ll call O, making a gain of £24,000 and paying swap fees of £130. Between 13 and 15 October he opened and then closed positions in a stock I’ll call B, making a gain of £15300 and paying swap fees of £70. On 15 October 2021 Mr Z opened and then closed positions in the Volatility Index, making a gain of £5,400 on the positions overall although some were up and others were down. There were no overnight swap fees. On Sunday 17 October 2021 between 17:17 and 17:45 British Summer Time (BST) (12:17 and 12:45 Eastern Daylight Time (EDT)) Mr Z opened positions in “US Dollar / Japanese Yen_W”. The instrument was available from 10.05pm BST on Fridays and would close at 8pm BST on Sundays – broadly a period from US market close to Australian market open. Capital says it could “only be traded on Saturday and Sunday… any open positions will be automatically closed on Monday… using the average of the mid price between 17:10-17:30 EST/EDT on Sunday”. Also: “Weekend FX instruments are completely independent to weekday FX. Open positions will not net off against any open weekday FX positions”. At 22:18 on Sunday 17 October 2021 Mr Z opened positions in “US Dollar / Japanese Yen”. He closed them on Monday 18 October at 13:18 with a small gain. This was the normal USD/JPY product - trading in the weekend USD/JPY product he’d opened earlier had already ended by the time he opened these new positions. On 18 October 2021 Mr Z asked Capital to cancel his USD/JPY_W trade. In essence his issue was he hadn’t realised it was the weekend version of USD/JPY and the “W” and name of the instrument wasn’t clear to him. He hadn’t checked the spread, as he’d trusted and understood Capital to offer competitive spreads compared to other providers, but the spread was many times higher than for the usual USD/JPY. The price wasn’t moving (the weekend period had ended) and he was concerned losses in future could reach high percentages given the leverage.

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Capital told Mr Z he was ultimately responsible for checking what he was trading before trading and it would consult internally but as the trades had been made there was likely to be no way to pull them back. When asked if he was otherwise happy with everything else, Mr Z said there was a past event but he wanted to focus on the USD/JPY issue he’d raised. He said he would “just learn how to do things step by step now” and referred to a language barrier. He said he supposed a discussion he would bring up was his financial literacy which was a constant concern but for now he wanted to focus on his USD/JPY issue. At 5:08am on Tuesday 19 October 2021 Mr Z’s “US Dollar / Japanese Yen_W” positions were closed (by ‘dealer’) with a loss of around £1900. I assume this loss was based on the average dollar yen price between 10.10pm and 10.30pm BST on Sunday and that the trade was closed and the loss debited by Capital on Tuesday rather than Monday because Capital was looking into the query Mr Z had raised about it – but nothing turns on this. On 19 October 2021 between 7:17 and 7:40am Mr Z opened a number of positions in the Volatility Index at prices mainly between 16.66 and 16.61. Mr Z’s positions would gain if the price increased. He bought around 51,000 contracts, setting a ‘take profit’ of 18 for these. He later reset this for some contracts to 21 or 23 around midday later that day. Mr Z added 6000 contracts to his position at 16:16 that day with the price at 16.36. He included a stop loss of 15.65 on 1000 of these. He paid overnight swap fees of more than £2500 at 21:00 BST (being US market closing time) on his 57,000 contracts. The price at that time was 16:025. On 20 October 2021 at 3:53 Mr Z’s stop loss was triggered with a price of 15.64 and so 1000 of his 57,000 contracts closed. His loss was £521 at that time. A loss of £520 per 1000 on Mr Z’s 56,000 remaining contracts would’ve totalled £29000 at that time (520 x 56 = £29000). He was likely down more, given he had bought most of his positions at a higher price than he’d paid for the contracts that had just closed by stop loss. But later that morning at around 7:45am the price was apparently back to 16.68 or 16.36, which would mean Mr Z’s positions had recovered much of this potential loss. But he’d lost £3000 at that point from the swap rates and the stop loss closed trade. At 9pm on 20 October 2021 Mr Z was again charged overnight swap fees of just over £2500 on his 56,000 contracts. The price at that time appears to have been 15.71, meaning Mr Z’s positions were at that time again carrying a significant loss perhaps in the region of £29000. On 20 October 2021 Capital called Mr Z back about his weekend USD/JPY trade. It told him the trade had closed and he would have to bear the loss. Mr Z said the meaning of the “W” symbol hadn’t been clear and wasn’t commonly used but he also said this was a very small point. He said he had other concerns but would prefer to speak about them another time. Capital offered him a call back the next day or the day after and Mr Z opted for the later date. On 21 October 2021 Mr Z’s remaining positions in the Volatility Index were closed out at prices from 15.19 to 15.23, making a loss at that time of around £57300. So in total Mr Z lost around £63,000 on these Volatility Index trades, of which around £5000 was swap fees and £58,000 was due to changes in the price of the index. This is in contrast to the £6000 Mr Z had made trading this instrument on the other two occasions (during which he hadn’t held the positions after 9pm and so hadn’t paid any swap fees). According to a summary sent by Capital, Mr Z’s trading lost him £76,760 plus swap fees of £7,484. Overall, he made £48,700 on winning trades and lost £125,500 on losing trades. He deposited £113,615 and withdrew or was returned £29370.

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In a call of 22 October 2021 Mr Z suggested a minor had opened his account and carried out the trading without his permission, funded from his bank to which he had reported this. He told Capital he had discovered this in September 2021 – and that his passport and identity documents had all been accessible on his laptop. When asked why he hadn’t raised this with Capital earlier, he told Capital his health issues, including the issue for which he would have surgery, but also a referral he had for a neurological health condition (which he specified in the call) meant there had been a lot for him to handle. Capital suggested it would freeze Mr Z’s account in light of his suggestion that he hadn’t authorised the trading on it. It called him on 4 November to confirm it had suspended the account – and also to explain that it was for him to report the crime and in the meantime Capital would take no action except to return his remaining funds. It reiterated this to him in a call of 15 November. Mr Z’s remaining account balance was later returned to him by Capital. A little over three years later, in February 2024, Mr Z made his current complaint to Capital, seeking a refund of all his trading losses. Mr Z says in the meantime he had left the UK to recover his mental health at home. He has said his health had impacted his ability to make sound financial trading decisions, so his trades didn’t reflect his true intentions or risk tolerance. Mr Z says when Capital ‘onboarded’ him, it failed to document or account for his health condition – and this “contributed significantly to my frustration with the overall experience”. He says this failure to properly consider his health condition during the onboarding process calls into question whether the products he was offered were suitable - especially as he says he clearly disclosed his condition (but doesn’t have a formal record of doing so) in informal communications with Capital’s agent (who contacted Mr Z after his account opened). Mr Z says Capital should have taken extra care to ensure his trading was in line with his needs and abilities, especially as he was receiving treatment at the time. Mr Z says that given his health and the complexities of trading, Capital had a duty of care to ensure he fully understood the risks, costs, and terms of its products, including its CBOE/VIX and USD/JPY products. He says Capital failed to adequately inform him about the risks, costs (such as spreads and overnight funding) and overall implications of his trading, which directly contributed to the financial losses he incurred in the first month of his trading. Mr Z said he mistakenly believed he could trade the USD/JPY_W product during weekdays as he thought the ‘W’ referred to ‘week’ but he later discovered trading was only permitted during the weekend. He said he believed the CBOE VIX instrument related to “Central Bank of England” interest rates. He has said he was not aware of the spread cost or overnight funding charge for products like VIX. He said he had limited understanding of such complex financial products, which were never within the scope of his education. Capital’s final response in April 2024 said Mr Z had passed its appropriateness evaluation, and noted the level of past trading experience he had told Capital of. It said its products were clearly described on its platform. It made clear its Volatility Index product related to expected market options volatility of the S&P 500 index. It also made clear the USD/JPY_W product could only be traded at the weekend. When referring his complaint to us Mr Z emphasised that product descriptions couldn’t be found easily enough on the platform. He said he had very limited ability to focus due to his health issues, and he wasn’t fit to trade high risk products like the volatility index. He said there should be protective policies that identify and take additional care of those who are “mentally disabled” because trading platforms are causing harm to people with health issues like his, especially when they have no understanding of the products or cost of funding. Our investigator considered Mr Z’s complaint. Our investigator thought Capital didn’t know

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about Mr Z’s medical issues, and Mr Z hadn’t told Capital about these, so Capital couldn’t be blamed for not taking these into account. Our investigator also thought Capital warned Mr Z of the risk of losing money, in statements such as: “CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.” Mr Z didn’t agree with our investigator’s conclusions. He made further points, including, in brief summary: ▪ There may not be a specific rule mandating that clients be asked about conditions of the kind he had before being granted an execution-only CFD trading account. But the firm's duty of care, particularly under MiFID II's suitability and appropriateness requirements and the FCA's Treating Customers Fairly (TCF) principles, suggests additional safeguards should be in place. Specifically, ensuring clients are fully aware of the risks associated with complex products like CFDs is essential, and assessing whether a client is in a position to make informed decisions is part of the firm's responsibilities. ▪ His call reference to minors was an analogy for vulnerability and not to be taken literally – and English isn’t his first language. His heightened health symptoms and health challenges are reflected in that call and made it incredibly complex to communicate the situation. These challenges played a significant role in his extreme communication difficulties in 2021. ▪ During the client onboarding process, he should have been asked whether he had any physical or mental conditions that may affect his ability to make informed trading decisions. He doesn’t recall being asked about this or see this was documented on his account. Such questions would’ve potentially prevented his difficulties. ▪ He was shocked Capital didn’t have information and hadn’t discharged any duty of care concerning his health condition and its impact on his ability to trade. His Capital account manager had no interest in asking him about this either. This compares unfavourably with Capital’s competitors, including one with “clear onboarding processes where they ask questions like whether a person is disadvantaged or mentally ill, which could impact their ability to make informed trading decisions.” ▪ Goods and services industries give reasonable warnings about the suitability of products or services for potential clients with specific conditions. Certain goods are not suitable or even prohibited for people with specific conditions, such as age or health concerns. Food packaging often has allergy warnings for specific populations. “Given all of this, I’m struggling to understand why I seem to be treated as though I need to bear the burden of proof regarding any health struggles I may have.” ▪ He was uncertain as to when and with whom he should discuss difficulties he experienced or an inability to trade. There was ambiguity. A lack of clarity around this may have contributed to the issues he is experiencing. ▪ Call recordings show he was someone without capacity to trade or fully comprehend the complexities of highly leveraged financial instruments like VIX. His limited understanding of his own mental capacity is key, as is Capital’s duty to assess whether he was vulnerable or incapable of engaging in high-risk activities. This is particularly relevant when it comes to gaps in product knowledge.

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▪ He was diagnosed as having a particular form or condition of neurodivergence in 2025. He has since been encouraged to manage his impulsive behaviours which have impacted his finances and daily life. He will provide proof of his condition if it is doubted. ▪ He could not afford the losses incurred on high-risk trading platforms. This matter has caused significant financial hardship for him, further affected by his neurodivergence and health condition. ▪ There was a clear power imbalance between him and Capital. He is not in a legal or mental position to scrutinize the entirety of the case, so there could be conduct breaches outside those raised with us. ▪ Capital has an interest in acquiring clients for profit. A statement of the total commission generated for Capital as a result of his trading, would provide insight into the overall profit generated from his situation, so he’d like to see this. -provisional decision text ends. My provisional decision explained I wasn’t planning to uphold the complaint, and set out my proposed findings and conclusions in the following terms: What I’ve provisionally decided – and why Capital is a regulated firm subject to the rules set out in the regulator’s handbook, including the Conduct of Business Sourcebook (‘COBS’) section. Capital didn’t advise Mr Z to apply for the Capital account or to trade on it as he did. It was Mr Z’s own decision to apply. So Capital wasn’t responsible for assessing whether the account was suitable for Mr Z. The account allowed Mr Z to trade on an execution-only basis, meaning he would be responsible for the trading decisions he would make on it. But the rules (at COBS 10A) did require Capital to assess whether the service Mr Z was applying for was appropriate for him, meaning it had to determine whether Mr Z had sufficient knowledge and experience to understand the risks involved in the trading account he was applying for. To do this, Capital had to ask Mr Z for information about his investment knowledge and experience relevant to that account. So it had to ask him for information about his level of education and his profession, the types of investment services or products he was familiar with and the nature, volume, frequency and length of his experience with these. The information Capital collected from Mr Z indicated he had some experience in trading instruments like those the Capital account would offer him. It indicated he understood the mechanics of certain aspects of this sort of trading too. His answers also indicated he was aware of the speculative nature of this trading and of the risk of loss. Mr Z’s application indicated he had wealth of less than £25,000 and was unemployed. But the appropriateness assessment required Capital to determine whether Mr Z had sufficient knowledge and experience to understand the risks of the trading account. It wasn’t about assessing Mr Z’s wealth. Also, Mr Z’s application indicated he intended to invest or risk less than £1000 in his trading. So there wasn’t anything in the figures provided by Mr Z that would point to an issue with his understanding of what he was applying for. I don’t overlook that Mr Z deposited and traded far larger sums than those mentioned in his application. But this doesn’t change my view that based on his application it was reasonable

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for Capital to assess Mr Z as being capable, by virtue of his experience and knowledge, of understanding the account risks. Mr Z says there should be more safeguards to ensure clients are fully aware of the risks of complex products like CFDs, and to assess whether a client can make informed decisions. But I’m not persuaded Mr Z wasn’t aware of the risks of his trading or that Capital ought to have seen him as not able to make informed decisions. From his application, it seems to me Mr Z presented himself to Capital as someone with relevant knowledge and experience of trading the kind of instruments the Capital account offered. On balance, I don’t think the information Mr Z provided ought to have prompted Capital to conclude the account wasn’t appropriate for Mr Z and warn him accordingly. In my view it was reasonable for Capital to assess Mr Z as someone capable of understanding the risks the account would present. Mr Z has drawn our attention to medical conditions and symptoms he suffered from. He has also referenced his level of financial understanding, his language ability and low ability to withstand financial shocks due to his health and finances. I’ve considered these points. Capital was obliged to comply with the FCA’s expectations on how to identify and treat vulnerable customers. The FCA in February 2021 produced FG21/1 “Guidance for firms on the fair treatment of vulnerable customers”. It defined vulnerable customer as “someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”. Customers should receive a level of care that is appropriate given their characteristics. Capital’s online application process didn’t invite Mr Z to disclose vulnerabilities. But Capital did offer other channels through which it could be contacted – such as phone or email – had Mr Z wanted to inform Capital of any needs or vulnerabilities. Capital also called Mr Z on the day he started trading, so it made itself available to him if he wanted more help. The FCA guidance is clear that frontline staff should take steps to encourage disclosure where they see clear indicators of vulnerability but aren’t expected to go further than this to proactively identify vulnerability. Mr Z says he disclosed his health condition in informal communications with Capital’s agent, but having listened to his calls with Capital he did this only after suffering the losses he suffered. The earliest mention of it was 22 October 2021. So I’m not persuaded Capital had grounds to suppose Mr Z was vulnerable due to his health either at the outset or while he was doing his trading. I’d add that I don’t think Mr Z regarded himself as unfit to trade – or he wouldn’t have opened the account. I say this bearing in mind he opened the account with the benefit of experience he said he had of trading instruments like those Capital offered. So if Capital had asked Mr Z at the start about vulnerabilities that might affect his trading, it isn’t obvious to me that Mr Z would or could have given Capital information that would’ve led Capital to conclude he shouldn’t trade. His comment that his understanding of his own mental capacity was limited at that time, tends to reinforce my view on this point. While Mr Z’s health conditions were a matter of fact, Capital would’ve needed to rely to some extent on Mr Z’s judgement when it came to assess what, if any, impact these might have on his ability to use Capital’s services. But Mr Z was applying for those services and presenting himself as someone with knowledge and experience of those services. I’d add that there’s no suggestion that Capital ought to have considered Mr Z to lack the capacity to manage his affairs in general – he was legally entitled to make his own decisions.

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Mr Z has suggested that when he told Capital, after suffering his losses, that his account had been opened or operated by a minor, and that he had reported this to his bank, he was really referring indirectly to his own vulnerabilities and didn’t actually mean or mean to convey that he hadn’t opened and funded the account himself. I don’t find this persuasive given he also stated at that time that he had reported the fraud to his bank. The call recordings are not at all consistent with the interpretation Mr Z suggests. In any case, this incident was after Mr Z had already suffered his trading losses. However, Mr Z did tell Capital on 18 October 2021 – a month and a half into his trading - that his financial literacy was a “constant concern”. I note that it was after this that Mr Z opened the set of trades on the VIX instrument that led to the substantial losses he now seeks to recover. If Capital had stopped him making further trades in response to his 18 October 2021 call, Mr Z wouldn’t have suffered those losses. So I’ve thought about this carefully. Mr Z gave Capital no details of the nature or seriousness of his concern about financial literacy. But his suggestion was that this was something he wanted to discuss in future and not at that time. So Capital knew it was an issue Mr Z thought could be left for later. Also the comment was made in a call in which Mr Z was arguing for a refund for a trading error he made - trying to trade USD/JPY outside normal market hours (trading USD/JPY_W instead). But that error in my view didn’t point to any fundamental flaw in Mr Z’s understanding of the risks of trading on his Capital account in the way he was doing. Also Mr Z told Capital he had traded without checking the spread – so he might have avoided the error had he checked. He has been able to identify subsequently that the spread was higher than for the normal weekday instrument. Also points he made about leverage, spreads and potential losses, indicated an understanding of the instruments he was trading and their financial implications. Capital invited Mr Z to raise any concerns he had and gave him the opportunity to elaborate during the call if he had wished. He did not do so. On 20 October 2021 he again alluded to having concerns that he didn’t wish to discuss at that point. When offered a call back about these, he chose the later of the dates Capital offered. By the time it came Mr Z had already suffered his losses. With all this in mind, I don’t think Capital was unreasonable to accept that the question of financial literacy Mr Z wanted to discuss was one that could be discussed later at a time of Mr Z’s choosing. I don’t think what Capital knew when Mr Z raised this point, ought to have led it to think Mr Z wasn’t able to understand the risks of his trading or the mechanics of the instruments he was using. It would’ve been hasty and potentially unfair to Mr Z for Capital to stop or restrict Mr Z’s account on 18 October 2021 in my view. I note Mr Z also referred on 18 October 2021 to a language barrier. But he studied at a UK University and in any case knew the language of the platform he chose to trade on from the start. I don’t see that Capital was better placed than Mr Z to judge whether his language ability was sufficient to use the platform. So I don’t see how Capital could reasonably have intervened for Mr Z on that point. But I’m not in any event persuaded that language issues were at the root of the losses Mr Z complains of. In my view Mr Z’s losses arose primarily because market movements he anticipated or hoped for, didn’t happen and went against him instead. Mr Z’s substantial losses in his first month of trading were the result of placing large trades on the fortunes of a small number of companies whose share prices went in the wrong direction. He lost over £60,000 on such trades but recovered around £40,000. The size of the losses was a result of the size of the trades Mr Z chose to place. I don’t see that these were due to any lack of clarity by Capital or any misunderstanding on Mr Z’s part. So I’m not persuaded Mr Z’s losses show he lacked the knowledge needed to trade or was unable to

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understand the platform or the workings of the instruments he was trading. The size of his early losses and gains made the risks abundantly clear by the time Mr Z made his trades on the volatility index. He knew he was trading with large sums that were resulting in losses and gains of significant size, both in absolute terms and as a proportion of the funds he had deposited in the account. Mr Z’s losses arose because he made large bets on share price, currency and other market movements but the market moved against him. He made gains on some similarly large trades which went in his favour. His large losses reflected that the losses on his losing trades outweighed these gains. Information about product costs, spreads and overnight funding was available to Mr Z on the platform. Capital also suggested to Mr Z that he review the spread of any instrument before he traded it if he hadn’t traded it before. Mr Z’s losses primarily resulted from markets not moving in the direction he needed, rather than from costs or spreads, but I’m not persuaded he was someone who didn’t understand the risks or costs. So I’m not persuaded Mr Z’s losses arose as a result of any failing on Capital’s part to inform him of the risks or the costs. Mr Z conceded he didn’t check the spread on his JPY/USD_W trade. I note that he paid swap or overnight fees on his later VIX trade, but this was because he chose to keep the trades open – which at one point appears to have worked to reduce his running loss significantly, although this later reversed when the market moved against Mr Z. As regards how these instruments were described, I agree with Capital’s response. I’m not persuaded by what Mr Z says about thinking VIX/CBOE related to Bank of England rates. Mr Z has said he couldn’t afford the losses he made. But the concerns he raised with Capital initially weren’t about the affordability of the sums he was trading. They were about whether it was fair for Mr Z to bear the losses given the clarity of the platform’s explanations and the degree of understanding he could’ve been expected to have. Mr Z did trade far larger sums on his account than his application suggested he planned or had access to. But on balance I don’t see that Capital ought to have stopped Mr Z from using in his trades the sums he deposited with Capital to trade. He funded the account from his bank account. He lost substantial sums but still had a substantial balance remaining when his trading concluded. I note also that when Mr Z initially blamed the trading on a third party, he didn’t suggest the account hadn’t been funded from his own resources. His point was that he hadn’t authorised that funding, but he has since withdrawn that point anyway. Mr Z has suggested I ask for a breakdown of the charges or profit made by Capital on Mr Z’s account. But I don’t consider this is something I need to see to reach a fair and reasonable decision here. Financial businesses like Capital of course profit from the commissions or charges on customers’ accounts but this doesn’t mean Capital did anything wrong or treated Mr Z unfairly here. I’d mention that my role is to decide individual complaints on their particular facts, rather than to judge the adequacy or otherwise of a firm’s systems or processes in general. In considering Mr Z’s complaint I’ve considered whether there are any fair and reasonable grounds for me to require Capital to compensate Mr Z – so I’ve not only thought about points Mr Z has put forward. But having considered all I have, I’ve not identified a basis for asking Capital to compensate Mr Z. … Mr Z says his losses on high-risk platforms have caused him financial hardship – which I am sorry to hear. He refers here to more than one platform – and in his complaint he referred to practices of a variety of different firms. Mr Z had traded before he joined Capital but insofar

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as he continued to trade elsewhere later, it would tend to reinforce the idea that it wasn’t unreasonable for Capital to not identify Mr Z as someone who shouldn’t have traded in 2021. But this isn’t essential to my conclusion here and it isn’t why I’m not upholding his complaint. -provisional decision text ends. Mr Z didn’t agree with my provisional decision and made further points. He said he was demonstrably vulnerable when he started to trade and Capital’s appropriateness test and subsequent responses did not comply with FCA expectations for identifying and supporting vulnerable customers. His supporting and further points included, in brief summary: ▪ Capital failed to identify and respond to vulnerability under FG21/1. It was obliged to take proactive steps to identify and support vulnerable individuals – but fell short because its onboarding process in 2021 had no process to identify such customers. As Capital’s core business is high-risk, complex leveraged trading, relying on generic channels and an execution-only label, without any structured vulnerability questions at onboarding, is not equivalent to a designed process to identify vulnerable customers and doesn’t meet FG21/1’s expectations. ▪ He was a vulnerable customer under the FCA’s FG21/1 definition, due to concurrent physical illness, mental health difficulties, domestic abuse (including financial control) and financial dependence. These medical and social factors collectively meant he lacked the capacity to properly evaluate complex financial risks during that period. His mental health difficulties were diagnosed from April 2021, before he opened his account, and persisted throughout. A physical issue diagnosed in July 2021 that required investigation caused severe physical and emotional distress that substantially weakened his decision- making abilities. Social isolation and prolonged confinement as a student in the Covid period also significantly impaired his cognitive focus and mental resilience. He was vulnerable and as a young, unemployed student with low declared wealth applying to trade leveraged CFDs, he also fell squarely within a foreseeable high-risk cohort. ▪ He joined Capital Com to engage in simple stock investing, not complex derivative trading in which he had no experience. So there was misalignment between Intent and product risk. His intention when opening the account was to engage in relatively simple stock trading. He didn’t understand VIX, weekend FX or the cumulative impact of swap and leverage in the way a sophisticated derivatives trader would. ▪ Capital’s platform design wasn’t "clear, fair and not misleading" for a non-native English speaker under medical and acute psychological stress. For example, he misunderstood the symbol “USD/JPY_W,” incorrectly believing the “W” represented “Week” rather than “Weekend.” This confusion evidences a failure to ensure clear communication and adequate risk explanation to vulnerable consumers. ▪ Capital allowed him to deposit £113,615 but didn’t identify he was a student with no employment and that the funds were debt. This lack of scrutiny placed him at significant financial harm, contrary to the expectations in FG21/1 regarding financial vulnerability. ▪ The appropriateness test was a tick-box exercise that counted his past trades but didn’t probe his risk tolerance, mental health or the complexity gap between his previous trading and VIX/weekend FX products. ▪ The provisional decision notes his application disclosed wealth below £25,000 and an intention to risk less than £1,000, but says Capital wasn’t obliged to stop him trading larger sums once he had funded the account. But under FG21/1 and the FCA’s fair- treatment expectations, the stark mismatch between his stated intention (risking less

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than £1,000) and his actual deposits (over £113,000, largely debt) should have been treated as a significant indicator of financial vulnerability and impaired decision-making. In combination with his health and capability disclosures, this called for a higher level of care than he received. ▪ He didn’t explicitly mention health issues to Capital until after his losses. But FG21/1 refers to a spectrum of vulnerability and to firms recognising indicators in customer behaviour, not only explicit medical disclosure. In his calls he struggled to communicate, used an analogy involving minors, postponed difficult conversations because there was “too much to handle”, and directly raised concerns about his literacy and language. When viewed together with his medical diagnoses, these behaviours are consistent with a vulnerable customer who needed more protection than an ordinary experienced trader. ▪ His admission on 18 October 2021 that his financial literacy was a constant concern, combined with his difficulty understanding a non-standard instrument label (USD/JPY_W) and the much wider spread, should have been treated as a clear indicator of low capability under FG21/1. This was before he opened trades that lost £63,000 on the VIX index, so if Capital had stopped him trading he wouldn’t have made that loss. Rather than leaving this to be discussed at an unspecified later date, it would’ve been the safer and fairer to pause or restrict his trading, or at least reassess appropriateness. Regulatory guidance required an immediate review of the product suitability. ▪ He is still of the view that his overall losses arose in circumstances of vulnerability that were not appropriately managed. But at minimum redress should be considered in relation to the approximately £63,000 loss on the VIX index incurred after 18 October 2021 when his vulnerability had been explicitly signalled but not acted upon. Whether Capital complied with FG21/1 in how it identified and responded to his vulnerability, particularly after his 18 October 2021 disclosures, should be reconsidered as should whether it is fair and reasonable that he bear the full loss on the subsequent VIX trades. As the matter remains unresolved, it has been passed back to me to reconsider. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, the conclusions in my provisional decision remain my conclusions and I’m still of the view that there aren’t grounds here on which it would be fair and reasonable for me to ask Capital to compensate Mr Z. Insofar as Mr Z’s response suggests I should give different weight to points I discussed in my provisional decision, and reach a different conclusion, I’m satisfied that I gave due weight to those considerations in reaching my provisional view. I don’t find Capital at fault for concluding the account was appropriate for Mr Z, based on consideration of his knowledge and experience. My view on this point does not place weight on gains Mr Z made on some large, early positions – as those trades happened after Capital’s decision to grant him an account. But those trades – and the losses Mr Z made on them – do tend to reinforce my view that Mr Z was aware of the risk of loss and that trading large sums could lead to large gains or losses. I’d emphasise that my role is not to judge the adequacy of Capital’s processes in general but to consider whether Mr Z lost out as a result of the matters he has complained of. It isn’t in dispute that Capital didn’t ask Mr Z at the start about vulnerabilities that might affect his

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trading. I accept Mr Z did have vulnerabilities, including some he has only recently told us of. But when it came to assessing the impact Mr Z’s health or social vulnerabilities might have on his ability to use Capital’s service – or the extent to which the language of the platform would inhibit his effective use of the platform - Capital would’ve had to rely to some extent on Mr Z’s judgement of that impact. Mr Z did not in my view regard himself as unfit to trade, as he decided to open the account and did so with experience of trading instruments like those Capital offered. Also he knew the language used by the platform. So if Capital had asked Mr Z about vulnerabilities that might affect his ability to use its platform, I don’t see that what he would’ve told Capital would’ve led Capital to conclude he had vulnerabilities that meant he shouldn’t be allowed to trade. His comment that his understanding of his own mental capacity was limited at that time, tends to reinforce my view on this point – as does the fact that certain vulnerabilities he has told us of were not mentioned at all until recently. It seems very unlikely Mr Z would have told Capital about them at the start if it had asked, let alone told Capital these were reasons Capital ought not to allow him the account he was asking Capital to provide him. Mr Z hasn’t suggested he didn’t have the experience of trading CFDs his application said he had. He has indicated he intended to trade CFDs on shares, which he did trade initially. But his decision to trade CFDs on other underlying assets or indices was his own. There’s no suggestion he was induced or persuaded by Capital to trade those instruments. Also I don’t see that Mr Z’s vulnerabilities prevented him from finding out what the instruments he was trading were before trading. In any case I’m not persuaded that Mr Z’s losses on the VIX instrument arose due to Mr Z misunderstanding what the instrument was. I’d add that Mr Z’s trades on CFDs on shares made large losses before making large gains to partly recover. In that regard that trading wasn’t different in substance to his later trading. Mr Z applied for Capital’s services presenting himself as someone with knowledge and experience of using such services. I remain of the view that his application indicated he had some experience in trading instruments like those the Capital account offered and was aware of the speculative nature of this trading and of the risk of loss. Also he didn’t lack the legal capacity to manage his own affairs and make his own decisions. If Capital had revisited Mr Z’s application after he started to use his account and trade, and had reviewed his application answers in light of the sums he had introduced to his account, it would have been apparent his trading wasn’t in line with those answers and so what he had told Capital about his resources or his intentions in his application was inaccurate or untrue. But his purpose in making his application and giving the answers he gave was plainly to obtain the account and allow the trading he carried out on it. He opened large trades on single company stocks almost as soon as his account was opened (with large losses which he partly recovered in later trades). There is nothing to suggest that the scale of his trades wasn’t deliberate and intended by him. It was something he decided to do almost as soon as he had the account. I’m not persuaded Mr Z’s financial vulnerability was apparent or made plain to Capital. Mr Z didn’t raise with Capital any concerns about the affordability of his trading in any of the calls he had while his trading was ongoing. Nor did he mention during his trading or at any time in his initial dispute with Capital in 2021 that he had been using borrowed funds to trade, as he has said now. So this doesn’t seem to be information he wished to volunteer to Capital. So if Capital had identified Mr Z’s trading as being inconsistent with answers he had given on his application, I’m not persuaded this would most likely have led to Capital obtaining from Mr Z information about the source of his funding that would have led Capital to prevent

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Mr Z from continuing with the trading he had decided to embark upon. In saying this I bear in mind that Mr Z made no reference to having used borrowed funds even after he had made his losses or when he first tried to recover these losses from Capital by disputing that he had made or permitted the transactions he had made on his account. I don’t overlook that if the sums Mr Z introduced to his account were borrowed, the ability to borrow such large sums and to have them free to introduce to a trading account doesn’t seem to match Mr Z’s status as an unemployed student with limited savings, as disclosed on his application. But it seems to me that investigation or inquiry into how or why Mr Z obtained the lending that, from what he has told us, was available to him at the time to trade with is not, on balance, something I consider it necessary to undertake here to reach a fair and reasonable conclusion on this complaint. I note the points Mr Z raises about the 18 October 2021 phone call. My provisional decision explained my view that it wasn’t unreasonable for Capital to accept Mr Z’s suggestion that his concern about his financial literacy was something to discuss in future, bearing in mind - amongst other things - that Mr Z gave no detail at that time of the nature or seriousness of his concern. I explained the other factors that in my view made Capital’s actions reasonable in that regard at that point, and I won’t repeat my reasoning as it is already set out above. As regards Mr Z’s points on language difficulties, I noted he had studied at a UK University. Mr Z’s losses arose because he made large bets on share price, currency and other market movements but the market moved against him. I’m not persuaded he didn’t understand the risks or costs. His losses primarily resulted from markets not moving in the direction he needed, rather than from costs or spreads. I don’t accept that his losses arose in fact due to a lack of financial literacy, notwithstanding the misunderstanding about the Yen instrument. Mr Z’s trading led to large losses and I acknowledge that Mr Z, some years later, faces a variety of difficulties he has explained are linked to those losses or to the trading behaviour that contributed to them. I’m very sorry Mr Z is facing those difficulties. But in light of all I’ve said above, and taking into account what is fair and reasonable in all the circumstances, I’ve not identified grounds on which to award Mr Z redress for his losses on his Capital account. So for the reasons I’ve given, and in light of all I’ve said, I do not uphold Mr Z’s complaint. My final decision For the reasons I’ve given I don’t uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr Z to accept or reject my decision before 30 April 2026. Richard Sheridan Ombudsman

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