Chelsea Financial Services Plc · DRN-6142091

The complaint Mr M’s complaint against Chelsea Financial Services Plc (“Chelsea”) is about the suspension of trading on his stocks and shares ISA account. What happened Mr M is a long standing customer of Chelsea and holds a stocks and shares ISA account with them. In September 2023 Chelsea called Mr M and told him that the Financial Conduct Authority (FCA) had temporarily suspended all trading on investment accounts held on the Chelsea Platform. Chelsea wrote to Mr M on 25 September 2023 to provide more information. The letter said: • Mr M’s funds would remain invested and continue to go up or down depending on market movements, but Chelsea were unable to accept any instructions to buy or switch funds until further notice. • The suspension was a result of restrictions placed by the FCA on Chelsea’s platform provider, IBP Markets Ltd (“IBP”). • In May 2023 the FCA had restricted IBP from taking on new clients. ln full consultation with the FCA, Chelsea had initiated intensive efforts to identify a new platform provider. They were nearing the final stages of that process and within four weeks of proceeding with the transfer. • However, on 15 September 2023 the FCA imposed additional restrictions on IBP, halting all trading activities. Chelsea had received no indication that the FCA were contemplating that step. • Chelsea expected administrators to be appointed to facilitate the dissolution of the IBP business. That process would entail a comprehensive reconciliation of client accounts followed by a transfer of Mr M’s investments to a new platform. • Chelsea couldn’t provide a timescale for that transition, but confirmed they were in ongoing communications with the FCA and striving to expedite the process. In March 2024, Chelsea asked Mr M to open an account with their replacement platform, ‘Platform One’. Mr M was told that initially only 80% of his assets were to be transferred. In the event it took until November 2024 to complete the transfer of 80% of his assets, with 20% remaining tied up on the Chelsea Platform. Mr M made a formal complaint to Chelsea in September 2024. He said, in summary: • He was concerned that he might lose the remaining 20% of his assets. • As he was a direct client of Chelsea, and they chose to use IBP for their platform, the onus should be on Chelsea to replenish the shortfall in his account.

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• His investments had been illiquid for a long period due to the ongoing suspension of trading and that had added greatly to the stress he was experiencing because of his uncertain employment situation. • He noted that the FCA first raised concerns about IBP in May 2023. Chelsea should have told him at that point about the concerns, and he could have transferred his funds before they were suspended in September 2023. He would have transferred his funds because he would have had serious reservations about Chelsea’s plan to set up an alternative platform given how long it had taken to do so previously. In their response to Mr M’s complaint, Chelsea said they were working tirelessly to try and find a resolution. They said, however, that the platform suspension was beyond their control and, while they had sought to keep Mr M updated, the pace at which the administrators were working was also beyond their control. In their submissions to our service, Chelsea have said they contacted the FCA after the initial restrictions were placed on IBP in May 2023. At that time, they were prevented from taking on new customers to the platform, but the FCA told them it was ‘business as usual’ in respect of existing customers. Chelsea said they couldn’t have foreseen the actions the FCA took in September 2023, so they weren’t aware of any need to transfer clients’ assets away. One of our investigators made an initial assessment of Mr M’s complaint in March 2025. He said that he thought IBP were agents of Chelsea and that Chelsea were therefore responsible for any failings of IBP, including its failure to keep Mr M’s account accessible. He said that Chelsea should put Mr M back in the position he would likely have been in, were it not for IBP's suspension. He also said that Chelsea should pay Mr M £500 for the distress and inconvenience caused to him. Chelsea disagreed with our investigator. They remained of the view that Mr M had been treated fairly and reasonably throughout and that his complaint should not be upheld. In their further submissions to our service, they said: • They didn't accept that IBP was their agent in the way that had been suggested. The terms and conditions of Mr M’s contract with Chelsea created a separate direct contract between IBP and Mr M. They did not believe it was correct to hold Chelsea accountable for actions that were wholly beyond their control. Chelsea took proper steps at each stage of the process. • They had stayed in touch with the FCA since becoming aware of their interest in IBP, and they weren’t given any reason to suspect that their customers’ assets were at risk. It was not possible for them to foresee that such severe restrictions would be placed on IBP and as such no further action could have been taken in advance. • They had begun exploratory discussions with other platform providers in January 2023. These were prompted by their ongoing planning rather than any FCA concerns about IBP. By July 2023 they had identified two prospective providers and at the time of suspension in September 2023 they were in active discussions with the FCA about transitioning their customers to a new platform, a process that would take a number of months. • The administration of IBP is wholly outside their control. They have kept Mr M informed of progress and consistently sought to support and reassure him.

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• The vast majority of Mr M’s assets were transferred in June 2024. In some cases, fund managers took longer to process the transfers, and one took until November 2025 due to a corporate action. Mr M has had access to 80% of his investments for a considerable period of time, had not drawn on those funds and continued to invest through Platform One. • Parts of the redress recommended by our investigator were impossible for them to effect. Mr M would be unfairly prejudiced if Chelsea were obliged to follow the resolution proposed and the impact on Chelsea’s business would be wholly disproportionate. Another investigator reviewed this case and issued a revised opinion in January 2026. She said: • She was no longer persuaded it was fair or reasonable to hold Chelsea responsible for IBPs' failure in the way our investigator had concluded previously. Having studied the contracts which existed between Chelsea and their customers and between IBP and Chelsea, it was clear that in becoming customers of Chelsea, customers formed their own contract for services with IBP. IBP had their own set of obligations and responsibilities which they had to honour under the terms of their contract with customers which were different from the obligations and responsibilities which Chelsea owed to their customers. • It was Chelsea's responsibility to arrange for the safeguarding and administration of their customers’ investments, and it was IBP's responsibility to actually perform the safeguarding of those investments. For that reason, she couldn’t fairly or reasonably conclude that it was Chelsea's fault that IBP was no longer fulfilling that function, such that she could expect it to step into IBP's shoes. It may well be that IBP's customers would have a valid claim with the Financial Services Compensation Scheme (FSCS) for their lost funds. • However, she was not persuaded that Chelsea had treated Mr M fairly. She said that where a firm arranges for the safeguarding and administration of their customer's investments, they must ensure that at all times they are meeting their customer's information needs, considering their best interests, and ensuring that those assets are safe. The evidence persuaded her that Chelsea failed to do that for Mr M. • As of May 2023, Chelsea knew the FCA had taken a special interest in and were investigating IBP. The FCA’s intervention prevented IBP from taking on new clients. Chelsea elected not to inform their customers of this and had evidenced extensive discussions with the FCA where they were assured that things remained "business as usual" for Chelsea. That being said however, she thought there was an extent to which Chelsea ought reasonably to have realised that the FCA's intervention posed a risk to their customers. • The FCA's intervention prevented IBP taking on any new clients. It wouldn't however have prevented any clients from leaving IBP's platform, at least in the short-term. Mindful of their obligations to meet their customers’ information needs whilst arranging the safeguarding and administration of their investments, she thought Chelsea ought fairly and reasonably to have warned their clients of the issues IBP was facing. • By not warning Mr M, Chelsea deprived him of the opportunity to make an informed choice about whether to move his investments elsewhere. As a result, he suffered

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the upset and disruption of learning months after the FCA's action that he wasn't able to access his funds. To address that, she thought it was fair and reasonable to require Chelsea to pay Mr M the sum of £500. • However, she didn't feel she could fairly or reasonably hold Chelsea responsible for the loss of Mr M’s investments. Ultimately, IBP were accountable to Mr M for that aspect of the service they were providing. It was never Chelsea's responsibility to step into the role of an ISA custodian and Mr M would likely have the opportunity to claim his losses from the FSCS. Mr M disagreed with our investigator’s findings. He said, in summary: • It was not made clear to him by Chelsea that he had a direct contractual relationship with IBP when he was moved to the Chelsea Platform. He should have been told that and warned of the risks and potential consequences. • In an email to him the FCA said he was “not a direct client” of IBP. In the Special Administrator’s view, he was not a direct customer of IBP. • He agreed that Chelsea should have warned him of the problems with IBP and that based on the evidence, in all probability, Chelsea were in a position to issue this warning long before 25 May 2023, when the FCA stopped IBP taking on new customers. Given how long it took Chelsea to set up a platform with IBP, if he had been warned by Chelsea of their concerns about IBP, he would have chosen to move to a new provider, rather than risk waiting for Chelsea to set up and move him to a new platform. • It has now been over two years since the FCA suspended trading on the Chelsea Platform and 20% of his funds remain frozen with no sign of an end to the administration process. FSCS claims will not be considered until the IBP administration process has been completed. It is therefore not fair or reasonable to expect him to accept the investigator’s recommended redress without an imminent and guaranteed date for the administration process to be completed, and for his frozen funds to be returned. • While he agrees that £500 is possibly reasonable for the shock and upset caused to him, he believes that he should also be compensated for the real losses he would not have incurred had he been able to transfer his investments elsewhere before they were frozen in September 2023. Mr M explained the additional compensation he is seeking: o After he lost his job in June 2025, he needed to generate income from his ISA investments and so he transferred most of the accessible funds held on his Platform One account into six monthly income funds. He plans to transfer to another provider when the remaining 20% of his funds transfer across to Platform One. When this happens, he will need to sell his monthly income funds and buy them on another provider’s platform. He says he will lose money in that period (£1,381.36). He would not have incurred that cost if he had transferred in 2023 so Chelsea should meet it. o The cost of holding funds on Platform One is higher than other providers. He says that has cost him over £800 which will rise to £1,518.90 if it takes 20 months from November 2025 for the remainder of his investments to be

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transferred across to Platform One. o He lost the ability to access or manage 80% of his funds for 9 to 14 months, and the remaining 20% for over two years and counting. During those periods, he could not review poorly performing funds and switch into better performing funds, which is likely to have cost him money. Chelsea reiterated their position on Mr M’s complaint. They said the FCA explicitly reassured them it was ‘business as usual’ for IBP. They were given no indication that trading activities would be halted in September 2023 and didn’t want to panic their customers. They accept that Mr M has suffered inconvenience, but he hasn’t lost his investments. 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. I should first make clear the role of our service. The Financial Ombudsman Service was set up as an informal alternative to the courts. We are not the regulator, and we do not oversee the industry; that’s the role of the FCA. We have no regulatory or disciplinary powers, which means we can’t direct a business how to operate, and we can’t impose any penalties. We consider each case on its own facts and where things have gone wrong, we look to put them right on a fair and reasonable basis. Having reviewed the available evidence on this case, I agree with the conclusions reached by our investigator and will now explain my reasons for doing so. I have first looked at the roles and responsibilities of Chelsea and IBP as they relate to the matters complained about in this case. Both Chelsea and IBP are regulated by the FCA. I note from the FCA’s Financial Services Register that, among other activities, Chelsea have permission to undertake “arranging (bringing about) deals in investments”; and “arranging safeguarding and administration of assets”. They do not have permission for the actual safeguarding and administration of assets and cannot hold and control client money. The activities that IBP had permission to undertake included “safeguarding and administration of assets (without arranging)”. They could also hold and control client money. I’ve seen a copy of a Custody Service Agreement between Chelsea and IBP which is consistent with those permissions. It explains that the agreement came about because Chelsea wanted to provide execution only platform services to its clients and appointed IBP to provide custody, support, administration and data services in relation to its provision of execution only platform services. It sets out the terms under which IBP will provide those services. I’ve reviewed the terms and conditions for the Chelsea Platform that Mr M would have agreed to. They explained that while Chelsea provided investment services to Mr M, he also had a separate agreement with IBP in relation to the custody of his assets. On page 2, under the heading ‘relationship with us’, the terms say: “Acceptance of these Terms and Conditions will constitute the formation of a contract between you and Chelsea Financial Services and between you and IBP. This means that you are also entering into a legal relationship with IBP for the custody of your

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investments. The terms under which IBP provides its custody service are attached to these terms (Schedule 1).” The document later says, under the heading ‘custody of your investments’: “Chelsea Financial Services Plc utilises IBP Markets Ltd (IBP) for the provision of custody and asset administration services. All investments will be registered by IBP in the name of its nominee IBP Nominees Ltd, which will have legal ownership of the investments and hold them for your benefit. Acceptance of these Terms and Conditions will constitute the formation of a contract between you and Chelsea and between you and IBP”. Under the heading “Terms and Conditions for Custody Services” the document goes on to say: “[Chelsea] provides investment services to you, its customers, and has appointed IBP...to provide dealing and custody services for this purpose, on the basis that IBP will be directly responsible to each customer for the custody services. These Terms set out the basis on which IBP agrees to provide custody services to the customers and constitute a separate legal agreement between IBP and each customer”. The terms and conditions for the provision of custody services by IBP to the customer are annexed to the Chelsea Platform terms and conditions at Schedule 1. Clause 1.1 reiterates that Chelsea provides investment services to the customer; has appointed IBP to provide dealing and custody services for that purpose; and that IBP are directly responsible to the customer for the custody services. Clause 3 lists the services that IBP provide as the custodian: • “holding all client assets or arranging for them to be held in safe custody; • collecting all distributions and other entitlements arising from Client Assets and accounting for them to the customer; • settling transactions to acquire or dispose of client assets on the instructions of Chelsea and using funds provided for the purpose by the customer.” I think it is clear from the documents I have quoted above that IBP was responsible for the custody of Mr M’s assets and that there was a direct customer relationship between Mr M and IBP for that purpose. While I note that Mr M has said that the FCA and the special administrator have suggested that he was not a direct customer of IBP, based on the evidence I’ve referred to above, I’m satisfied that he was. For that reason, I don’t think it would be fair and reasonable to hold Chelsea responsible for any failings on IBPs part in relation to the actual safeguarding and administration of Mr M’s assets. I agree with our investigator that it would not be fair to expect Chelsea to step into IBP's shoes and replenish the shortfall in Mr M’s account in the way he is seeking. It may well be that Mr M will have a valid claim with the FSCS when the administration process has been completed. Chelsea were however responsible for arranging the safeguarding and administration of Mr M’s assets. In considering Chelsea’s actions and whether they have treated Mr M fairly I have taken account of the FCA’s Principles for Businesses. I have also considered the fact that Chelsea had to meet some of the requirements in relation to the custody of assets which are set out in the FCA Handbook under CASS 6 (custody rules). These include requirements to:

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• Arrange adequate protection for clients’ assets when they are responsible for them. • Enter into a written agreement with any person with whom they deposit clients’ safe custody assets, or with whom they arrange safeguarding and administration of assets which are clients’ safe custody assets. • Consider carefully the terms of any agreement entered into with a third-party and to address certain issues within such an agreement. As I’ve noted above, Chelsea had a written agreement with IBP that set out the terms under which IBP would provide custody, support, administration and data services to Chelsea. Based on what I’ve seen, including that agreement, I’ve not seen evidence that Chelsea failed to act with due care in arranging the safeguarding and administration of Mr M’s assets. I’m also satisfied that through the terms of his account, Chelsea made sufficiently clear to Mr M the nature of their agreement with IBP and Mr M’s own relationship with IBP. Chelsea have consistently said they were not aware of any concerns with IBP prior to the initial restrictions being imposed by the FCA in May 2023 and that, following that, they were told it was ‘business as usual’ for their existing customers. They say they couldn’t have foreseen the actions the FCA took in September 2023 or been aware of any need to transfer clients’ assets away from IBP. Chelsea’s position is consistent with the evidence I’ve seen, including correspondence relating to their discussions with the FCA in July 2023. Chelsea relayed to the FCA that they were exploring alternative arrangements for their customers and were actively engaging with two potential new platform providers. Chelsea asked the FCA if they anticipated imposing more restrictions on IBP, and if there was a scenario where customers’ accounts could face suspension. It appears Chelsea did not receive any more information, and there were no further discussions, prior to the FCA publishing their First Supervisory Notice and imposing further restrictions on IBP on 15 September 2023. Following that, Chelsea called Mr M to inform him of what had happened and then wrote to him on 25 September 2023. Based on the evidence I’ve seen, I think Chelsea took reasonable steps to understand the situation with IBP and its impact on their customers. And they were in discussions with alternative providers with a view to transferring their customers across to a new platform – a process which would likely take some months. However, Chelsea also had an obligation to consider Mr M’s information needs and so I’ve considered whether I think Chelsea should have communicated with Mr M after the initial restrictions on IBP had been imposed in May 2023. It’s important not to consider this point with the benefit of hindsight; I accept that Chelsea could not have foreseen that the FCA would suspend all trading on the Chelsea Platform just a few months after the initial restrictions were imposed. I accept too that Chelsea had been reassured by the FCA that it was ‘business as usual’ for their existing customers. Chelsea have also said they didn’t want to cause unnecessary alarm and confusion amongst their customers and that they had started discussing a new platform provider in January 2023, before they were aware of the issues with IBP. However, while the initial restrictions imposed by the FCA did not affect Mr M’s ability to trade on his account, I think they would still have been of interest to him. Once the restrictions had been imposed, Chelsea were aware that IBP were experiencing difficulties and that the restrictions prevented them from taking on new customers. Chelsea were actively discussing moving their existing customers to a new platform and were aware of the significant impact it could have if their customers were to be negatively impacted by any further developments.

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Taking all of this into account, on balance I think Chelsea should have notified Mr M of the restrictions that had been imposed in May 2023. While Chelsea would no doubt have reassured Mr M that it was ‘business as usual’ for his account, I think it would have been reasonable for Chelsea also to have given him some indication that IBP – who were responsible for the safeguarding and administration of his assets - were experiencing difficulties. By not doing so, Chelsea failed to provide Mr M with information that was relevant to his account. He was also deprived of the opportunity to make an informed decision about whether to retain his Chelsea Platform account or switch to another provider. I think Chelsea’s failure to communicate with Mr M at that time caused him distress and inconvenience. Mr M has said he would have transferred his account to another provider if Chelsea had told him about the restrictions placed on IBP in May 2023, given how long it had previously taken Chelsea to move accounts to a new platform. I accept it is plausible that Mr M might have done so, although I can’t be sure what he would have decided at the time. Neither can I be sure of any costs that Mr M would have incurred by such a switch, the fees an alternative platform provider would have charged or what investment decisions Mr M might have made if he had retained access to all his funds. And as I’ve concluded above, I don’t think it would be fair to hold Chelsea responsible for any losses that Mr M might ultimately incur because of any failings on IBP’s part in the safeguarding of his assets. I don’t therefore think it would be fair and reasonable for Chelsea to meet the specific additional costs that Mr M has identified. Putting things right Taking all of the above into consideration, I think it would be fair and reasonable for Chelsea to compensate Mr M for the additional distress and inconvenience caused by their failure to communicate with him following the restrictions being placed on IBP in May 2023. That failure deprived Mr M of the opportunity to make an informed choice about whether to move his investments elsewhere. Taking account of Mr M’s circumstances, including his employment situation, and the distress caused to him I think it would be fair and reasonable for Chelsea to pay him £500 in compensation. My final decision For the reasons I’ve explained, my final decision is that I uphold Mr M’s complaint. Chelsea Financial Services Plc should pay Mr M £500 in compensation for the distress and inconvenience caused to him. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr M to accept or reject my decision before 7 April 2026. Matthew Young Ombudsman

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