CSS Partners LLP · DRN-5931328

The complaint Mr E’s complaint concerns investments made through CSS Partners LLP, an appointed representative of Charles Street Securities Europe LLP (“CSS”). He says the recommendations made to him weren’t consistent with his objectives, attitude to risk or financial circumstances. He also feels that there was a failure to disclose beneficial interests in some of the recommended shares and the associated costs of investing. As such, he seeks a refund of the losses incurred. In bringing his complaint Mr E is represented by a claims management company. But for ease of reading, I’ll refer simply to Mr E. What happened The background to the complaint will be well known to both parties, so I’ll only give some key details here. In January 2006 Mr E completed the process required to start an advisory relationship with CSS. As part of this, among other things, a client information form annex was completed, which recorded some personal details along with information about his trading history and attitude to risk. It was noted that he was aged 72, retired, with an annual income of £40,000. He owned two properties, both unencumbered with a total value of £1,350,000, held tradable investments (‘stocks, shares, gilts, etc’) valued at £2,000,000, liquid savings of £150,000, PEPs/ISAs valued at £70,000, £5,000 in Enterprise Investment Schemes and £142,000 in Venture Capital Trusts. The overall value of his assets, excluding his properties, therefore appeared to exceed £2,300,000. The form went on to record that he’d been investing for 30 years, typically trading five times a year on the FSTE 100 index, and under the investment objective part of the form his objective was given as wanting to maximise capital growth with Mr E being “prepared to accept a high level of risk in respect of 20% of [his] investments”. Between January 2006 and April 2008, Mr E went on to make a series of investments primarily into unlisted shares on the recommendation of CSS. He invested just over £70,000 in total, the majority of which was subsequently lost. He initially voiced some dissatisfaction with the situation in a letter to CSS in 2013, but the matter wasn’t dealt with formally as a complaint at that time. Further concerns regarding the suitability of the recommendations were then raised with CSS by Mr E’s representatives in 2022. These were ultimately referred on to this service and after a consideration of whether the complaint fell within our jurisdiction (due the length of time that had elapsed since the events in question) a view was issued on the merits of the complaint, looking at the recommendations made to Mr E after April 2007. Our investigator didn’t think the complaint should be upheld. She said, in brief –

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• CSS advised Mr E on the investments after assessing suitability. • He indicated he was prepared to accept a high level of risk in respect of his investing. And his overall high-risk investing fell below the 20% threshold he set based on his declared investment assets. • She felt Mr E understood the level of risk he was taking and what might occur. His decision to invest in high-risk investments was informed and intentional. • He had the required capacity to withstand the losses suffered. • He understood CSS’s involvement in the investments. Mr E didn’t accept the investigator’s view. It said, in brief – • It was clear CSS had provided to advice to Mr E and there was evidence to support the recommendations made to construct the portfolio. • In doing so, it failed to carry out an adequate detailed fact find during the period in question. • Mr E’s overall portfolio had been overstated – the total of over £2million actually included the value of his properties. • He didn’t have significant investment experience. His existing portfolio was managed by others on a discretionary basis. • He was led to believe that investing in a variety of companies produced an overall ‘medium’ level of risk, which would’ve been in keeping with his actual attitude. • Some of the documented existing higher risk investment had actually been made in in his wife’s name, not his. • There was no evidence that CSS properly evaluated Mr E’s attitude to risk and explained fully what the 20% limit in high-risk investments meant. The investigator wasn’t persuaded to change her view of the complaint. She stressed again that from the evidence reviewed she was satisfied the risk involved with the recommendations had aligned with Mr E’s position and that he’d repeatedly declared financial assets that suggested the recommendations had been reasonable. In short, Mr E was able to financially withstand the investment, his attitude to risk was considered and CSS had reviewed his objectives. Mr E reiterated his points regarding the actual size of his overall portfolio and lack of experience, which he felt meant that, in short, none of the recommendations had been suitable. As no agreement could be reached, the matter was referred to me to review. 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, I’ve come to the same conclusions as those reached by the investigator and I’ll explain my reasons for having done so below. I want to assure all parties that I’ve read and considered everything on the file. But that said, I’m satisfied I don’t need to comment on every point raised to reach what I consider to be a fair and reasonable decision. Where I’ve chosen not to comment on something, it’s not because I haven’t considered it. It’s because I’ve focused on what I think are the key issues. That approach is in line with the rules we operate under.

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Further, where the evidence is incomplete or inconclusive, I’ve reached my decision based on the balance of probabilities. That is, what I think is more likely than not to have happened in light of the available evidence and a consideration of the wider circumstances. As required by our rules, I’ve taken into account relevant law and regulations; relevant regulators’ rules guidance and standards; codes of practice; and, where appropriate, what I consider was good industry practice at the relevant time. But I think it’s important to stress that while I take all those factors into account, I’m ultimately deciding what I consider to be fair and reasonable in all the circumstances of the complaint. Firstly, before I comment on the merits of the complaint, I’ll touch briefly on the issue of jurisdiction. As noted, there’s been some ongoing consideration given to the issue of whether Mr E’s complaint was actually made in time, within the limits set out in our rules. Several differing viewpoints have been put forward in this respect, including a decision that the entire period in question – January 2006 to April 2008 – could be considered. For clarity, I agree with that particular decision. So, here I’m considering the interaction between CSS and Mr E during that period. But that said, I don’t think there’s anything to be gained by me adding anything further on this issue at this point, given my view that in any event Mr E’s complaint shouldn’t be upheld. Turning then to the reasons why I consider that to be the case, the crux of the matter is whether the recommendations made by CSS to Mr E were suitable for him. While CSS don’t appear to have a carried out a particularly detailed fact-finding process with Mr E, it did seek a reasonable amount of information about his personal and financial circumstances, sufficient in my view to conclude that the type of direct investment it recommended was something he was likely to understand and be able to bear the risk of. Principal to this is the size and nature of his existing portfolio. I appreciate Mr E disputes that his investable assets amounted to as much as was noted at the outset. But on balance, I’ve no reason to conclude that the figures weren’t broadly accurate. In addition to being recorded at the outset they appear to have been reiterated to different advisers over the period in question, with changes being made to them on occasion. And importantly the figures were relayed back to him annually as part of a process of confirming financial details. While the latter confirmations tended to give a total amount, certainly in 2007 Mr E’s ‘tradable investments’ were confirmed back to him as just over £2million and he was asked to notify CSS if this, or any other figure, was incorrect, which I’ve not seen that he did. This being so, it seems Mr E had a capacity for loss, particularly in the context of the relatively small size of deals he was making in the shares recommended to him, which averaged around £4,000 per trade. But that said, these were still high-risk investments, with the potential for the complete loss, as later transpired for many of the recommendations. Mr E was recorded as having 30 years’ experience of investing. He had investments that he’s said were managed on a discretionary basis, although there was no detail recorded at the time of what these were. But he also held VCT and EIS investments, to the value of around £147,000, which are higher risk investments. I note he’s said that these were either not held in his name or were simply recommended to him as a means by which to reduce tax. But I nevertheless think that involvement with this type of investment would’ve been likely to increase his knowledge and understanding of the markets. Indeed, I note that Mr E wrote to CSS in April 2007 following up on the process around an EIS qualifying recommendation it had made, suggesting an active involvement and understanding of this type of investment on Mr E’s part. And it seems clear that Mr E was warned of the risk of this type of investment. Both in the

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documentation provided to him, concerning CSS’ service and also in the documentation relating to the specific investments recommended to him. It also appears to have been reiterated to him in discussions about the recommendations, as demonstrated by CSS’ phone notes. I appreciate that the provision of information regarding risk doesn’t by default render an unsuitable investment suitable. But looking at the matter in the round, considering Mr E’s circumstances, experience and the nature of his interactions with CSS, I find I’m not persuaded it acted incorrectly or unreasonably in advising Mr E as it did. I think, on balance, the evidence supports that Mr E was more likely than not to have understood the risk involved and been actively interested in making these investments as part of a small proportion of his overall portfolio. I note the point that’s been made regarding the 20% issue – where Mr E ticked a box in the investment objectives section of the client information form that said he was prepared to accept a high level of risk in respect of 20% of his investments. I think this shows Mr E was clearly prepared to accept some level of high risk, and I don’t think it likely that he would have understood that to mean that no more than 20% of his investments with CSS would be high risk. But even if I’m wrong about that, I still don’t think it was unsuitable to recommend this type of investment to Mr E on the basis of his circumstances and investment knowledge and experience. In respect of conflicts of interest, as the investigator noted, these were dealt with generically in the client agreement, as were the charges and commissions, and more specifically in the documentation relating to the investments. While it may be the case that more clarity could have been provided, I don’t think it likely that these were issues that handled differently would ultimately, in isolation, have prompted Mr E not to invest. My final decision For the reasons given, my final decision is that I don’t uphold the complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr E to accept or reject my decision before 30 April 2026. James Harris Ombudsman

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