Interactive Brokers (U.K.) Limited · DRN-5756536

The complaint Mr H complains about the way Interactive Brokers (U.K.) Limited (IBUK) has operated the CFD trading he’s carried out within his SIPP. He says he’s been unable to transfer funds to meet margin calls, resulting in losses. And that IBUK have now stopped him opening new positions impacting his ability to trade the way he’d like to. What happened Mr H, through his SIPP administrator, opened an account with IBUK in 2021. He initially traded unleveraged stocks and funds. In 2023 Mr H applied to trade CFDs within his SIPP, and after completing an appropriateness assessment was able to do so. In early 2024, IBUK contacted Mr H to say he didn’t have enough money in his account to support his open CFD positions. It explained that his account was separated into “segments” – and his margin requirement for his CFD positions needed to be in the CFD segment, it couldn’t be satisfied from the other, unlevered trading account he held. Mr H says he had been unaware of this, and tried to move money between his account segments. Initially Mr H was unable to transfer the funds himself, and reached out to IBUK, who told him to contact his SIPP administrator. When they too were unsuccessful, Mr H contacted IBUK again who this time told him he’d need to request a manual transfer of funds. The transfer was eventually completed, but in the meantime some of Mr H’s positions had been closed due to insufficient margin crystallising a loss. Mr H complained. IBUK upheld Mr H’s complaint in part. It said largely his account had operated as it should have, and it was right that the different types of instrument Mr H held were in different segments, each needing their own cash balance to support. But it said it usually didn’t let SIPP clients trade CFDs, which was partly why Mr H had struggled to make the necessary transfer between his account segments. It said the transfer shouldn’t have taken as long as it did, but didn’t at that stage make any offer of compensation. After Mr H brought his complaint to our service, IBUK revised its position. It acknowledged Mr H had suffered a loss by the delay in transferring funds and the closure of his trades. It said it would calculate what Mr H lost between the time the positions were closed, and the time the transfer went through (when it said he could have re-opened them). They offered him this amount as well as $200 compensation for the stress and inconvenience he’d been caused. One of our investigators looked into the matter. In summary, she said: • It took IBUK 11 days to tell Mr H how to make a transfer between his account segments, and that he needed to call to make a manual transfer. • So it should amend its compensation offer to account for the position Mr H would have been in had the transfer completed 11 days sooner. • She also said IBUK should pay Mr H £400 for the distress and inconvenience he’d been caused, highlighting that Mr H was given unclear and conflicting information.

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• She didn’t think IBUK needed to do anything further in terms of the impact of the trades being closed. She said while Mr H may have made less loss (or indeed a profit) if the positions remained open, it was also possible his losses would have been even greater. • She also noted that Mr H could have mitigated and consequential impact by reopening the positions once the transfer completed. IBUK accepted the investigator’s view but Mr H didn’t. In response he said, briefly: • He wasn’t made aware of the account segmentation and the need to keep separate balances. • IBUK’s SIPP accounts work differently from their non-SIPP offering and it’s much harder to administer. IBUK have continued to tell Mr H that he or his SIPP administrator can make transfers between segments but it isn’t the case. He’s had to go through lengthy and inconvenient processes with IBUK to arrange manual transfers which has led to delays for something that is time critical. • This has been exacerbated by IBUK’s staff on its chat facility seeming to be unaware of the issues with SIPP segment transfers and not being able to help. • In investigating the complaint he’d discovered previous margin calls in 2023 which he thinks were caused by the same issue of segmentation, and he wants IBUK to compensate him for that. • The internal transfers to cover margin should happen automatically, but even once he made IBUK aware of the issue it took two weeks to transfer funds. • To fairly compensate him IBUK should pay him the full realised losses of the positions that were closed, not just the difference in price between two dates. • It wasn’t reasonable to expect him to reopen his positions, particularly as he had no confidence in his ability to manage those positions given the issues with topping up the balance of his CFD segment. • This is all the more the case because, soon after the events in early 2024, IBUK told him it was withdrawing CFD trading in its SIPP products. Since June 2024 Mr H has only been able to close existing positions and not open new ones. • It isn’t logical to say he could have mitigated his loss by reopening the positions when he’d been told the product was to be withdrawn. • This also affected his ability to manage other positions. He enters trades over time, averaging the cost if it moves against him. When he can’t open new positions he’s unable to do that. • Mr H also raised a new issue about being unable to close positions after June 2024 – this issue is being dealt with as a separate complaint. • The £400 compensation for his stress and time is too low. He’d spent around 100 hours dealing with this issue. The investigator wasn’t persuaded to change her mind. She responded to Mr H saying: • She thought the client agreement Mr H agreed to, and the information on IBUK’s statements and account portal were enough for Mr H to have understood his SIPP contained separate segments with separate cash balances. • She remained of the view that Mr H could have mitigated his losses by reopening the positions which were closed. And so the compensation she’d set out in her view remained fair. • Mr H was aware from around March 2024 that IBUK may remove his ability to trade CFDs, and then it told him that would definitely be the case in June. She didn’t think it would be fair to award for further future losses as Mr H knew that at a certain point he’d be unable to add to his positions and average the costs as he wanted to. • She remained of the view that £400 was fair compensation for Mr H’s distress and

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inconvenience. Mr H remained unhappy, and asked for his complaint to be escalated to an ombudsman. In his last submission he said: • While he accepted what the investigator said about the information in the contract about the segments, he now considers that IBUK may have made a contractual error in allowing him to open the CFD segment in the first place. • It appeared IBUK shouldn’t have let him trade CFDs, which is why the accounts have been so hard to administer. • This led to a breakdown of trust on Mr H’s part and why he was unable to trade the way he normally would. • He couldn’t have simply moved to another provide either. As this was a SIPP transferring takes time and a lot of procedures. This has cost and time implications which weren’t compatible with his continued trading. • In any event, Mr H isn’t aware of any other UK providers who facilitate CFD trading within a SIPP. 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. Firstly I’d like to thank the parties for their detailed and clear submissions. While I’ve summarised them above, I can confirm I’ve read and considered them in their entirety. My decision will not address each and every point that’s been raised in detail. The purpose of it is to set out my overall conclusions and reasons for reaching them. I’ll begin by addressing the overarching issue of Mr H’s ability to trade CFDs in his SIPP account with IBUK. Mr H thinks this was a mistake. And here I do think IBUK’s responses have been inconsistent. In one of its responses to our service IBUK positioned this as a simple business decision – it used to offer CFD trading in SIPPs, then decided not to in June 2024. It said that “prior to the Effective Date, SIPP administrators were able to apply for [CFD] trading permissions on behalf of their clients”. While that appears to be strictly true – such applications could be made, I’m not sure it was IBUK’s intent. In another email to our service IBUK said “generally, SIPP client accounts like [Mr H’s] would not be able to trade on margin even if their administrator permitted it. However [Mr H’s] account was able to do so because a small number of accounts were inadvertently able to trade on margin”. I note this for completeness but I’m not persuaded the reason behind Mr H’s ability to trade CFDs impacts the outcome of this complaint. IBUK had the regulatory permissions to offer CFD trading, it is technically allowed in a SIPP, and Mr H wanted to trade CFDs and it was appropriate for him to do so. Whether or not a client could trade CFDs in a SIPP isn’t detailed in any of the terms or agreements between Mr H and IBUK. So it simply was a matter for IBUK’s commercial judgement. And generally speaking, I don’t think it’s unfair or unreasonable for a firm to be able to choose what particular products or services it offers, nor to change those products from time to time providing it does so in a way that’s fair to its clients. The issue with how that account was administered has two main strands. Mr H’s awareness of how he’d need to manage balances across his account segments, and then IBUK’s

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administration of transfer requests. When Mr H applied for the CFD trading permissions, he needed to agree to a new set of terms for products carried by IBUK. This was distinct from the existing agreement he’d signed when opening his SIPP account. This is because for the non-CFD instruments Mr H traded, while IBUK administered the account the instruments were held by IBUK’s US affiliate, Interactive Brokers LLC. Whereas IBUK’s CFD offering was held with the UK firm itself. I’m satisfied the terms Mr H agreed to in 2023 made this clear. They explained that the agreement was for the relationship between the parties for “trading certain products carried by IBUK, including […] Contracts for Difference (“CFDs”)”. It went on to explain that this new agreement didn’t cover trading in stocks, shares, bonds or funds which were carried by IBLLC and governed by a separate agreement. I’m further satisfied that Mr H’s statements provided separate sections for stocks – indicating on the statement that these were held with IBUK but carried by IBLLC – and CFDs, indicating these were held with IBUK. And I’ve also seen screenshots of the various client interfaces for IBUK’s SIPP accounts, which give separate cash balances for “UK Regulated”, “UK Securities” and “UK Commodities”. Overall I’m satisfied that IBUK gave Mr H clear, fair and not misleading information about the way his SIPP account would operate. I think he ought to have understood that he had a separate agreement for his CFD trading and that this had a separate cash balance. I’ve seen nothing to suggest Mr H should have understood that the balances for one segment would apply to another automatically or that funds in one account (held by a separate entity) could be used to support margin trades in a different account segment held by IBUK. This means I’m satisfied it was Mr H’s responsibility to manage his account and the various balances in a way that he needed to to support his trading. As a result I don’t think IBUK can be held responsible for any losses Mr H suffered in 2023 due to margin calls if Mr H was unaware at that time he needed to add funds to his CFD account segment. What doesn’t seem to be in dispute is that when Mr H wanted to move money to his CFD segment, he’s not been able to in the way he’d like. I’m satisfied IBUK’s service here wasn’t up to standard. It appears to me that some of this stems from the question of whether IBUK really intended SIPP clients to trade CFDs. But given it did do, it then needed to ensure it provided that service in a reasonable way. That means it needed to do so in line with its obligations to carry out its business with due skill, care and diligence, and the need to have regard for its customers’ interests and treat them fairly. It’s clearly not good enough if Mr H was unable to move money into his CFD segment. I appreciate Mr H’s desire for that process to be a lot smoother – he’d like it to happen automatically or at least be able to make the transfer himself (or via his SIPP administrator) electronically. It’s beyond the scope of our service to tell a firm how to operate its systems or processes. And I think that as long as Mr H could transfer funds between segments in a reasonable time, then that would be enough to satisfy its regulatory and contractual obligations. I know Mr H finds this frustrating as he’d like to be more nimble in his ability to fund his CFD account quickly and react to market movements. But I don’t think there’s a reasonable justification for expecting IBUK to facilitate that. Mr H may consider having to

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manually request a transfer to be sub-par service and to require him to perhaps leave more in his CFD account than he’d like to – impacting his ability to fund trading elsewhere. But I think the ability to fund his account, by requesting a manual transfer, while the bare minimum, allows Mr H to reasonably operate his account. There’s a separate issue of how easy it has been for Mr H to make such manual transfers. I’m satisfied from the evidence I’ve been provided that IBUK hasn’t responded in reasonable time to such requests. In the instance that’s subject to this complaint, it took 11 days for IBUK to even tell Mr H what he needed to do. Once the request had been placed the transfer took place in a few days, which I think is fair. But, like our investigator, I think it’s right that Mr H is compensated for the amount of time it took IBUK to allow Mr H to request the transfer to begin with. Mr H has said he’s encountered the same problems with arranging manual transfers since then. As our investigator indicated this would need to be complained about separately, if Mr H feels that these repeated delays have caused further losses. If he’s unhappy with IBUK’s response he can bring his complaint to our service, but to be clear this decision is only concerned with the transfer request in early 2024. I’ll now turn to what I consider to be the crux of the issue still in dispute. That is the impact of the delayed transfer between segments in 2024, and what IBUK ought fairly to do to put things right. I’ve considered Mr H’s submissions on this point very carefully. In particular I’m mindful that in considering what Mr H could have done after the transfer completed, that matters are complicated by the fact he’d been put on notice that IBUK may withdraw his CFD trading facilities at some point. Mr H’s contention is that the transfer delay caused the liquidation of his positions which crystallised a loss. He wants the full amount of that loss to be paid in compensation. Our investigator said that Mr H could have reopened the positions, and effectively put himself back in the position he’d have been in but for the liquidation, less the loss while he was out of the market (which forms the basis of her compensation recommendation). Having given this careful thought, I agree with our investigator. I think it’s important to note that IBUK’s delays didn’t cause the loss Mr H made on his trade. It simply caused that loss to be crystallised. The loss in terms of the value of those positions at the time of liquidation had already been suffered. They were just running losses rather than crystallised losses. So I don’t think it would be fair for IBUK to be held responsible for the totality of the loss. The only way Mr H would have avoided suffering those losses later is if he held the positions and the market moved in his favour. While this may have happened, had his trades not been liquidated, I find it is equally possible that the positions may have never recovered or could indeed have moved further against him. I also agree with our investigator that Mr H had the ability to re-take that market risk in the hope of the positions recovering, by opening the positions again once the transfer completed. Again, I’ve given weight to Mr H’s contentions on this point. I do understand why he may have been reluctant to do so given his experiences to that point and the prospect of CFD trading being removed at a later stage. But until such a time IBUK didn’t prevent him being in the market if that’s what he wanted to do. But while I may understand his choice, it remained his choice to make. I don’t think it would be fair to award Mr H losses that weren’t caused by IBUK’s error. Where that error was a

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delay in providing the funds Mr H needed to support those positions, I take the view that the losses caused by that error are limited to those suffered while Mr H lacked the funds. I know it will come as a disappointment to Mr H but I don’t think any further compensation would be fair and reasonable here. This leads on to the final point, which relates to IBUK’s decision to stop offering CFDs to SIPP clients. In June 2024 it told Mr H this was its intent, and that in a few days he’d only be able to close existing trades and not open new ones. As I said earlier I think it was within the scope of IBUK’s legitimate commercial judgement to change the types of products it offered. In doing so it needed to have regard for customers’ interests, including Mr H’s. I’m satisfied that by allowing Mr H to retain his open positions, and reduce them at a time of his choosing, fairly balanced IBUK’s desire to remove this product offering with allowing Mr H a fair runway to manage down his account before closing it, or moving it elsewhere. I also appreciate that the “moving it elsewhere” option was limited for Mr H here. He’s explained that few, if any, UK firms offer the ability to trade CFDs through a SIPP. That may be the case, but I don’t think it means IBUK could fairly be forced to continue providing Mr H with the ability to open new trades just because no one else would let him do it. I understand that this impacted his ability to trade the strategy he wanted to. But I don’t think it caused Mr H any additional loss. Mr H had existing positions that would move either for or against him. If he suffered losses on those trades it was due to market movements and not IBUK’s decision to stop him trading new positions. In summary, I find that IBUK has failed to fairly facilitate Mr H’s attempts to transfer funds between his account segments, and it should compensate him for losses suffered as a result of its delays in doing so. But I don’t think it would be fair or reasonable in the particular circumstances of this complaint to require it do anything further. Putting things right IBUK should calculate the loss Mr H suffered due to the delay in funding his account. It should do this for each position closed by margin call in February 2024. Mr H should have been able to reopen his positions on 20 February 2024. So IBUK should calculate what Mr H would have made had he held his positions between the time they were closed and 20 February, using the closing price on that date. It should pay him the cumulative loss across the positions. I agree with our investigator that Mr H was also caused a degree of distress and inconvenience, by having his positions closed when they shouldn’t have been and in trying to arrange a transfer which ought to have been carried out more swiftly. I agree that £400 is fair compensation for that, and so IBUK should pay this sum to Mr H as well. My final decision For the reasons I’ve given I uphold this complaint and direct Interactive Brokers (U.K.) Limited to pay Mr H compensation as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr H to accept or reject my decision before 28 April 2026. Luke Gordon Ombudsman

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