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Challenging FOS decisions

  • United Kingdom
  • Financial services disputes and investigations


Can FOS adjudicate complaints where regulated and unregulated activities are entwined?

In the recent case of R (on the application of Tenetconnect Services Limited) v Financial Ombudsman Service (Defendant) & John and Frances Thorpe (Interested parties) [2018] EWHC 459 (Admin), the Administrative Court was asked to consider whether FOS was right to accept jurisdiction in relation to a complaint about regulated and unregulated activities. 

In what may be a surprising decision to some spectators, the court found that FOS did have jurisdiction because sometimes regulated and unregulated activities are so entwined that they cannot be separated - it is not always possible to take a “bright line” approach.  The law governing FOS’s jurisdiction could not force facts into unrealistic compartmentalisation without undermining its purpose and effectiveness.  The case evidences that where the edges of regulated/unregulated activities are blurred or are inextricably linked, the court considers that such cases are within the remit of FOS – to rule otherwise would defeat the aim of FOS – it being a scheme for quick and non-legalistic redress.


  • Mr Dhanda was a financial adviser and appointed representative of Tenetconnect Services Limited (“Tenet”).  He advised Mr and Mrs Thorpe to sell specified investments including a life policy, bonds and ISAs and also advised them to send money to him for him to invest in a property and to use as business-related loans.  Mr and Mrs Thorpe followed his advice and lost a significant amount of their life savings.  Mr Dhanda has since been convicted for fraud.
  • After a complaint to Tenet did not result in redress, Mr and Mrs Thorpe complained to FOS.  FOS’s final decision was that Tenet should compensate Mr and Mrs Thorpe for the loss caused as a result of fraudulent activities of Mr Dhanda in relation to regulated activities.
  • Tenet contended that, although Mr Dhanda in advising Mr and Mrs Thorpe to dispose of their specified investments was undertaking a regulated activity, any advice provided on what to do with the money realised from the disposal of the specified investments was not a regulated activity and it was this advice which caused the loss.  As this was outside the scope of FOS’s jurisdiction, it had no jurisdiction to consider the complaint.  FOS had rejected Tenet’s arguments because the Ombudsman considered that the nature of the complaint should be considered broadly (rather than in a precise or meticulous manner) and saw a close connection between the two aspects of Mr Dhanda’s advice.
  • Tenet applied to the Administrative Court to judicially review FOS’s decision.  The court had to consider: (i) whether the complaint was about the sale of the specified investments and the advice to invest in unspecified investments, or just about the advice to invest; and (ii) if it was about both, how closely the two aspects of advice were entwined, if at all, and thus whether FOS had jurisdiction to adjudicate the complaint.


Mr Justice Ouseley held that whether Mr and Mrs Thorpe’s complaint did or did not include a complaint about Mr Dhanda’s advice on the surrender of the specified investments was a matter of fact for FOS, subject to review on rationality grounds.  Notwithstanding this, the court found that FOS had acted rationally and had reached the only possible conclusion based on the facts – that the complaint related to both the advice to sell and invest.   

The court then had to decide whether the complaint fell within FOS’s compulsory jurisdiction and held that it did.  Even though the advice to buy, taken by itself and in isolation, was unregulated, it was all part and parcel of the advice to sell which was regulated and so the activities were so closely linked that they amounted to regulated activities.  Ouseley J held that “a bright line approach is wholly artificial and not warranted by the legislation or case law” and would create significant problems if it were to be correct.  He also held that Tenet (as principal of Mr Dhanda) was responsible under s.39(3) FSMA 2000 for the advice he gave as its authorised representative.


In this case, the court reached a pragmatic solution considering it plainly artificial to draw a distinction where, on the facts, an adviser specifically recommends that a specified investment should be sold because an alternative unregulated investment is preferable, but would not have made such a recommendation when no such preferable alternative existed. 

The judge accepted that there will be cases at the other end of the factual spectrum and that cases will need to be considered on an individual basis.  For example, it may be possible to take a “bright line” approach where a particular regulated investment has ceased to be suitable and sometime later the proceeds are placed in an unregulated investment on a later recommendation as to what now should be done.  However, to rule the link to be irrelevant in all circumstances would be artificial and would mean that regulated advice to sell a specified investment specifically to make an unwise unregulated investment would fall outside of FOS’s jurisdiction, which is not a satisfactory position.  Financial institutions should bear this case in mind when faced with complaints encompassing both regulated and unregulated activities.