Common Mis-selling Failings
There are many requirements that must be met when a broker recommends an investment to a potential investor ALL of which must be satisfied to avoid a claim being brought against mis-selling.
Below are some of the areas that frequently result in mis-selling.
Were the risks properly explained?
The stockbroker or IFA has a duty to fully explain all of the risks to you and ensure you understand them, every time you buy, despite you having heard this before! They should have made you aware that Small Cap companies (Penny Shares) have a higher degree of risk and that selling them later in amounts above the Normal Market Size (NMS), typically over £500 is difficult. A fact often not explained when an investor makes an investment.
Were only suitable recommendations made?
Even if you understood the risks and you were happy to proceed, the broker must ensure that the investment is suitable for YOU as an individual based upon the Fact Find you should have completed, despite your willingness to proceed.Suitability is only required where the financial intermediary provided an advised service (COBS 9). Where no advice was provided by the financial intermediary they would have been required to carry out an appropriateness test (COBS 10).”
Did you complete and sign a Fact Find - and did they properly consider it?
This is a form that you should have been asked to complete detailing your attitude to risk, savings, outgoings and various other information. This form (Fact Find) enables the broker to make measured decisions and then make only suitable recommendations for share purchases, based upon clear guidelines as set down by the Financial Conduct Authority