Spreadex Limited · DRN-5901557

The complaint Mr N complains Spreadex Limited (Spreadex) caused him financial loss by improperly allowing him to open a spread betting account and unfairly charged him for its services. His complaint is brought by his professional representative. What happened Mr N opened a spread betting account with Spreadex in May 2020. After incurring losses of almost £50,000 he complained to the firm, in summary saying: • It hadn’t followed the proper procedures when opening this account for him. • He wasn’t warned about the risks of spread betting. • He was too inexperienced to trade such products. • The firm failed to consider the impact his ability to bear the risks of such trading, or on his lifestyle. • Commissions and charges had been mispresented. • His account had been used by the firm to ‘churn’. Spreadex considered his complaint but didn’t agree it should be upheld. It explained this was because: • The risks of spread betting had been made clear to him. • The account was appropriate for him. • Clear information about fees had been provided to him • It doesn’t employ portfolio managers to trade in the way he has alleged on his behalf. Mr N remained dissatisfied and so asked our service to look into what happened. One of our Investigators considered his complaint but didn’t think it should be upheld. He explained this was because from his review of the evidence he thought the account was appropriate for him and he had been provided with enough information to understand the risks involved. As an agreement wasn’t reached, Mr N’s complaint was passed to me to decide. I issued a provisional decision as matters about Spreadex’s charges which are part of this complaint hadn’t yet been addressed by our service, and to provide additional reasoning for my outcome.

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In my provisional decision, I said: “I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. When Mr N applied for a spread betting account with Spreadex it needed to ensure this type of trading was appropriate for him. The relevant rules at the time, being those found within COBS 10A, required Spreadex to ask Mr N questions about his knowledge and experience of spread betting for it to be able to assess whether this trading was appropriate for him. Mr N’s representatives have argued that Spreadex’s obligations are instead those of providing suitable advice. But I don’t agree. I say this because the evidence provided doesn’t show any advice being given. In fact, Spreadex’s terms and conditions specifically state that it won’t be giving any advice in this arrangement and I’ve not seen any communication between the firm and Mr N to indicate any advice had been given, whether intentionally or not. I’m satisfied then Spreadex didn’t advise Mr N in the course of his business with it. As COBS 10A doesn’t require considerations to the impact of loss and risk of spread betting, as the rules around investment advice do, it isn’t unreasonable Spreadex hasn’t considered those factors here. As Mr N was trading derivative products on a non-advised basis, the relevant considerations around the opening of the account are those of “appropriateness”, as found in COBS 10A. In assessing whether spread betting was appropriate for Mr N, Spreadex asked him to complete a questionnaire. The answers he gave to this, in my view, demonstrate he had significant experience with derivative trading. I say this because he answered that he’d been trading such instruments for over five years, doing so on a weekly basis, had professional qualifications and had traded in both personal and professional capacity – citing a FCA authorised firm he carried that out on behalf of. Reading his answers as a whole I’m satisfied they demonstrate the knowledge and experience required of someone looking to open the spread betting account Mr N applied for. It’s also important to note here the rules allow Spreadex to rely on the information Mr N gave it in answering those questions unless there is a reason to doubt them, which I’ve not seen evidence that it ought reasonably to have done. Mr N had shortly after opening his account applied to be categorised from a retail client to a professional client. Although as he didn’t respond to Spreadex’s request for some further information his categorisation remained as retail throughout the duration of his trading with Spreadex. I’ve not seen that any of the information within that application ought to have led Spreadex to question the initial appropriateness of this account for Mr N, if anything it’s likely that would’ve reinforced it given his answers to that request. I’ve not seen all the information as Mr N would’ve seen it at the time Mr N opened his account, such as the application process, risk disclosures and Spreadex’s costs. But I have been able to locate much of this from archived versions of Spreadex’s website, which is consistent with how those pages look now. Given the evidence I do have and what I’ve said about Mr N’s prior experience, I’m satisfied I have enough evidence to determine this complaint fairly. Prior to opening the account, I think it’s likely Mr N would’ve seen and agreed to the terms and conditions of trading with Spreadex. I say this because if he hadn’t Spreadex wouldn’t likely have provided him with the services it did. These include

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information about the risks involved, which directs him to a “Risk Warning Notice”, and that it can apply charges for placing positions. I’ve seen a copy of the risk document on an archived version of Spreadex’s website from just after Mr N’s application, which I think is likely at the least indicative of what Mr N would’ve seen, if not the one in use at the time. In any event I note from other archived pages of Spreadex’s website that these provided explanations of how spread betting works, the risks involved and how it charges to trade them. From the information I’ve seen around this I think it’s likely Spreadex would’ve provided clear, fair and not misleading information about those matters to Mr N. In any event, given the previous experience Mr N disclosed to Spreadex, I intend to say that I think it’s likely he was already familiar with this information. Mr N’s representatives say Spreadex didn’t provide clear charging and applied commissions to trades he placed with it. But I’ve not seen persuasive evidence to demonstrate that. Having considered the information available, and my experience of its practices, I think it’s likely the fee charged to Mr N was part of the spread when he opened the position, which would’ve been disclosed by its nature on the dealing screen. In other word the price it sets the market to be traded on is priced slightly above or below, depending on the direction of the quoted position, where the market is trading. Looking at Mr N’s account records it appears all of his positions were spread bets and so was in my view likely charged through the spread in the manner I’ve described. I’ve also not seen any evidence of any other charges such as commissions being applied to his trades or account. It follows then I intend to say it’s likely Spreadex fairly disclosed to Mr M information about its services, including the charges and risks involved when using its spread betting services. Lastly Mr N has complained of trades being executed without him being involved which was done by the firm to “churn” charges and commissions from him. These aspects tend to be more relevant to discretionary management arrangements, which isn’t the service Mr N was receiving from Spreadex. I’ve not seen from the evidence that any such practices were taking place on his account. Spreadex provided him with an execution-only service that I’ve not seen it overstep. In my view then it’s likely the trades were all requested and placed by Mr N. I sympathise with the losses Mr N has incurred trading on this account. But where I haven’t seen its likely Spreadex fell below its obligations to him, I don’t intend to uphold his complaint.” Spreadex didn’t respond or provide any further submissions. Mr N and his representative responded to explain they disagreed with the outcome I had reached. In summary, they said this was because: • They felt the suitability of spread betting should’ve been assessed for Mr N because the firm overstepped into advice. • Inconsistencies in Mr N’s answers to the appropriateness assessment ought to have prompted Spreadex to investigate his circumstances further. • By “churning” what was meant was the system encouraged high volume short duration trading.

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• Mr N’s loss of £50,000 in a short period ought to have triggered Spreadex’s oversight mechanisms that Mr N was vulnerable by trading more than he could afford. • Spreadex providing an execution-only service shouldn’t absolve it from protecting vulnerable clients and treating customers fairly. • The information provided on costs was misleading, in particular the spread and daily funded charges As the deadline to provide any further information and submissions to my provisional decision had passed, the complaint was passed back to me to decide. 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 considered the further submissions by Mr N and his representative, I’ve not seen to reach a different outcome the one I reached in my provisional decision. I’ll explain why. Firstly, there are some matters raised in response to my provisional decision I won’t be covering in this decision. This is because in their response Mr N and his representatives have put forward new issues that Spreadex hasn’t first had the opportunity to address. The first being that being Mr N was financially vulnerable and that Spreadex should’ve identified that and prevented his losses. Additionally, the argument around the churning aspect of Mr N’s complaint has changed beyond the original scope. I will say on this point I was not wrong in my provisional decision to interpret that as it did. The content of the original complaint letter to the firm shows that argument was clearly presented to Spreadex as Mr N being concerned the firm was executing a large volume of those trades to increase his charges. Which isn’t what is being put forward now, that Spreadex had designed its systems, particularly its usage of a spread, to encourage Mr N to trade in a high volume short duration manner. Both of these are a new and separate issues to those submitted in the original complaint and isn’t the complaint that was referred to our service. I won’t consider either of those issues then in this decision because Spreadex itself hasn’t had an opportunity to consider that separate complaint, and by rule it would be required to hear that new complaint before our service can consider it. It would be for Mr N then, if he chose to, to pursue that complaint separately from this one, with the option to refer it to our service once Spreadex has issued its final response and the period allowed for it to respond lapses. Having reviewed the evidence available again regarding how the account was opened along with Mr N and his representative’s further comments on this point, I’ve not seen anything to support Mr N’s feeling that that Spreadex overstepped into giving him advice. I say this because I’ve not seen in the evidence available any personal recommendation to Mr N about any particular product, service or trade, which is what would need to happen to amount to advice. There is simply no evidence of any such practices, which is supported by what I said in my provisional decision about what the terms and conditions and notices would’ve likely said, the information shown when placing a trade and the way in which the firm onboarded him. Given I’ve not seen evidence of a personal recommendation being made to Mr N and the procedures to open Mr N’s account following those more akin to appropriateness, I don’t think it's likely Spreadex advised Mr N to either open the account or place any trades. It follows then the rules relating to suitability of advice don’t apply to Mr N’s relationship with Spreadex.

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Mr N and his representatives say the answers given in the appropriateness assessment were inconsistent and ought to have prompted further questioning from Spreadex, it argues COBS 10A.9.4 requires the firm to do so in such circumstances. Mr N added further information about his salary to support the overall picture of his situation at the time being one that derivative trading would be inappropriate for. I’ve considered all of those submissions, but I still find Spreadex’s conclusion the account was appropriate for Mr N was reasonable for it to make, given what I’ve already said above about the information Mr N told Spreadex about himself and his experience. I also don’t agree with Mr N and his representative’s interpretation of the appropriateness rules and note no such COBS 10A.9.4 exists as they’ve cited, nor does the framing of the rule it is said to relate to. As I set out in my provisional decision the rules require Spreadex to collect sufficient information to determine if the type of trading being applied for was appropriate. And, as opposed to what Mr N’s representatives have said, that the firm is entitled to rely on that information unless the firm is, or ought to be, aware that information is out of date, inaccurate of incomplete. Looking at the information Mr N gave Spreadex I’m not persuaded there’s anything there that leads me to conclude that Spreadex ought to reasonably have had concern about it being inconsistent, out of date, unclear, inaccurate or incomplete. In my view then, a reasonable conclusion from considering the information Spreadex had about Mr N, which was acquired by means of a reasonable account opening and appropriateness procedure, was that derivative trading would be appropriate for him. And that it would be reasonable for Spreadex to rely on the information it had when concluding so for the same reasons I set out in my provisional decision. Turning lastly to the charges, Mr N has provided a statement showing he’s also paid daily funding charges for holding positions overnight. These charges are typical across the industry when keeping positions open overnight, and in effect passes the charges the firm is incurring for managing that position to the client – such as borrowing costs or the costs incurred to hedge the overall exposure to a particular asset. Given the time since the account was opened, I’ve not seen how Spreadex would’ve presented the daily funding charge to Mr N. But for the same reasons as I said in my provisional decision about the applicable charges, I think on balance it’s likely that charge and how it would be incurred and calculated would’ve set out in a clear, fair and not misleading manner. I say this because the terms are worded in a way that would allow such a charge and both historic versions of the website prior to Mr N’s application, and more recent versions of it, explain the both the spread and daily funded charge, how it works, and how it’s calculated. In my view then I think it’s likely that information was presented to Mr N in a fair manner to Mr N when he opened his account and that he accepted to pay those fees when agreeing to the terms of Spreadex’s service. In reaching that conclusion I’ve also considered that Mr N’s experience, as disclosed to Spreadex, in both his initial and professional client application suggest such a charge would be familiar to him and not likely that would prevent him from placing applicable positions because of it.

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My final decision I don’t uphold Mr N’s complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr N to accept or reject my decision before 20 November 2025. Ken Roberts Ombudsman

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