Interactive Brokers (U.K.) Limited · DRN-5969660

The complaint Dr G complains that Interactive Brokers (U.K.) Limited (‘IBUK’) unexpectedly liquidated stock he held within his Stocks and Shares ISA. Dr G also complains that IBUK failed to provide a good explanation for how he was able to purchase these stocks in the first place if they could not be held in an ISA account, or outline why this particular product cannot be held (when regulator rules say it can be). What happened In 2024, Dr G purchased 70 positions within American Depositary Receipts (‘ADR’) stock. Dr G explains that IBUK decided these specific ADRs were ineligible to be held within an ISA account, despite seemingly meeting the criteria as outlined by HMRC on what ADRs can be held within an ISA. And IBUK liquidated these shares without his agreement. Dr G also complains that communication from IBUK on this has been very poor. He says the business has failed to explain how he could have purchased these ADRs in the first place using his ISA account if they are an ineligible purchase. He says IBUK forced liquidation of his positions, resulting in a loss of several thousands of dollars (US). To resolve his complaint, Dr G would like IBUK to reinstate his positions or provide alternative compensation for the loss he has incurred. He would also like a detailed explanation as to why this particular ADR is deemed non-qualifying despite HMRC’s guidance to the contrary. Dr G formally complained to IBUK in May 2025. In June, IBUK provided a final response. The business explained that ISA qualifying rules are complex, and it was only identified following an internal audit that the product Dr G selected was non-ISA qualifying. IBUK explains that a message was sent to Dr G about this and seeking instruction on what he wanted to do with his investments, but he didn’t take any action. So, the business had to decide to force the liquidation of this stock so that Dr G’s ISA remained HMRC compliant. IBUK said that to resolve Dr G’s complaint the business would waive any commission charges for the purchase of this particular product, and if Dr G wanted to hold these shares in a different type of account, then it would also waive the commission charges for the purchase process involved in buying these products within an non-ISA account. IBUK didn’t provide any other remedy to Dr G, explaining that it’s decision to liquidate followed a lack of response from Dr G and a need to keep his ISA account compliant with tax rules. Dr G was unhappy with this response, so escalated his complaint to our service. An investigator looked into this complaint and found that IBUK did provide a poor service to Dr G. But Dr G also didn’t mitigate his own losses. Therefore, whilst IBUK could have done better, the business isn’t responsible for the loss being claimed by Dr G.

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In summary, our investigator decided: - IBUK made an error in allowing Dr G the facilities to be able to purchase these positions within an ISA account. - IBUK provided a poor explanation as to why the particular ADR was non-ISA compliant. Our investigator explained how, to comply with tax regulation, ADRs need an underlying exchange based in the UK, EU or EEA. However, the ADR Dr G selected was delisted from the UK stock exchange in 2016. And whilst it is listed on NASDAQ, as a US stock exchange, this wouldn’t comply with HMRC rules on ADRs held within an ISA account. Our investigator said IBUK should have explained this to Dr G. - However, our investigator also explained how the stock didn’t have to be liquidated if Dr G had contacted IB when it sent him a message about what was happening, as there was the option for the stock to be held in a different account. Dr G acknowledged he received the message; he just believed that his positions were eligible based on his understanding of HMCR rules on ADRs. But this was not actually the case. So, Dr G failing to contact the business meant his opportunity to mitigate his loss was missed. By balancing both parties statements and evidence, our investigator decided that for the error made in allowing Dr G the purchase option, and for the poor communication provided around what ADRs could be held within an ISA, our investigator recommended IBUK pay Dr G £100 compensation for the confusion and distress caused. IBUK responded and accepted our investigator’s view, agreeing to pay Dr G £100 to fully resolve this matter. Dr G, however, rejected the investigator’s view. He says he cannot understand how it is acceptable that IBUK allowed for stock to be purchased within an ISA when it hadn’t been listed on a compliant exchange since 2016. He does not understand how this can be considered fair. As an agreement couldn’t be reached the case was passed to an Ombudsman for a final decision. 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. I have summarised this complaint and what has happened linking back to the crux of what Dr G says went wrong. The purpose of my decision isn’t to address every single point raised by all of the parties involved. If there’s something I’ve not mentioned, it isn’t because I’ve ignored it - I haven’t. I’m satisfied that I don’t need to comment on every individual argument to be able to reach what I think is the right outcome. No discourtesy is intended by this; our rules allow me to do this, and it simply reflects the informal nature of our service. Instead, I will focus on what I find to be the key issues and evidence relevant to this complaint. Overall, I agree with my investigator colleague that there is some failing on the part of IBUK. And the impact of the service failings requires a remedy. At the same time, I also agree that the business is not responsible for the full loss being claimed, as there was opportunity for Dr G’s financial losses to be mitigated/lessened had action been taken within the two-week window offered by IBUK.

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Therefore, I too will be recommending IBUK pay Dr G £100 as a financial remedy for poor communication, as I consider this is fair. And I won’t be asking the business to compensate Dr G for his claimed financial loss. I will outline how I have reached this decision. I’ve looked through the relevant terms and conditions that apply for the Stocks and Shares ISA account Dr G holds with IBUK. I’ve done this to identify what should happen, and then looked at what did happen, to decide what is fair and reasonable in the circumstances. The two primary documents where the terms of the account are outlined are within the IBUK General Terms of Business (‘General Terms’) and within the ISA addendum to the General Terms of Business (‘ISA addendum’). Within the ISA addendum, it explains the following: ‘ISA Holding 6.1 ISA Regulations stipulate that you are only permitted to invest in certain instruments defined as Qualifying Investments. 6.2 You are not permitted to hold non-Qualifying Investments in your IBUK Investment ISA. If IBUK becomes aware that you are holding such non-Qualifying Investments, IBUK may, at its discretion, either: i. liquidate any non-Qualifying Investments and credit any cash proceeds (minus any applicable fees and charges) to your IBUK Investment ISA; or ii. transfer all and any non-Qualifying Investments to your other (non-ISA) IBUK account(s). Such action will be carried out in compliance with the ISA Regulations and Applicable Law.’ IBUK’s General Terms also say, under section B2.2, that IBUK: ‘…do not guarantee the accuracy, timeliness, or completeness of the information. Reliance on the quotes, data and information is at your own risk. You should conduct further research and analysis of consult with an investment advisor before making investment decisions.’ Reading these terms together, I can see why IBUK took the action it did to liquidate Dr G’s shares. The business is required to comply with relevant ISA regulation. Therefore, the liquidation of positions is an appropriate step to take to ensure compliance so that funds held do not potentially grow in a tax efficient account when they shouldn’t do. Relevant terms allow the business to take this action. Therefore, I am not critical of the action IBUK took here. Furthermore, it is important to explain that Dr G is an execution only client. He used the IBUK Stocks and Shares ISA platform as a way to buy investments online. I haven’t seen any information to suggest that IBUK acted as an advisor for Dr G, or that there was a discretionary arrangement in place where there is a greater expectation for more from the business than simply carrying out the administration and logistics required to hold investments in a single digital account in one place. Ultimately, when purchasing stock on a non-advised basis, it is up to the consumer to be confident and seek advice, if necessary, on the suitability of products being selected.

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However, whilst execution-only are expected to take responsibility for the decisions they make about products and services, this does not mean that there is no responsibility on the part of a business when it comes to execution only clients. FCA guidance and Consumer Duty principles say that information provided to consumers should be fair, clear, and not misleading. The Consumer Duty further explains that businesses must give consumers the information they need, at the right time, and presented in a way they can understand. That way consumers can make informed decisions. Where I am critical of IBUK is the fact that the business offered this option in the first place to be purchased within an ISA account, when this shouldn’t have happened. IBUK has an obligation under ISA manager regulation: “Managers can offer non-discretionary ISAs, where the investor makes investment decisions. In these circumstances, managers remain responsible for ensuring that investments purchased are qualifying investments.” IBUK ought to have taken reasonable steps to ensure it doesn’t facilitate the purchase of non-qualifying shares within an ISA account. The ISA regulations on ADRs haven’t changed since 2018. And regulation is clear that the underlying share needs to be ISA eligible for an ADR to be held within an ISA account. These rules aren’t ambiguous or complex, and detailed guidance is available on this matter. So I do believe that IBUK ought to have known at the time Dr G made his purchase that these positions couldn’t be held in the account they were in. However, whilst I am critical of the business for allowing this purchase in the first instance, it is important to take a holistic view of the complaint as a whole, and balance what is reasonable in the circumstances. So whilst I am of the view that IBUK provided this option in the first place when it shouldn’t have done, I’m also of the view that IBUK did try to put this situation right in a reasonable way, including contacting customers impacted and offering solutions, when the business realised this problem. I have seen and read through a copy of the message IBUK sent to Dr G on 16 April 2025 to tell him about his ADR positions and how these cannot be held within an ISA account. Within the letter, the business writes: ‘Our review of your account determined that the above positions [ADR] do not meet the criteria applicable to these specific products. As a result, the product does not qualify to be held in an ISA, and these positions must be removed from the ISA account. We strongly encourage you to close these positions at a time and method of your own choosing. You may, of course, reopen these positions in your regular investment (non-ISA) account. Please note, however, that should you not take action. Interactive Brokers will be required to close them on your behalf… Interactive Brokers will liquidate the above stated non-qualifying positions if they remain open on 30 April 2025,…’ This message is clear, fair, and not misleading. Action needed to be taken before the deadline given. Otherwise, any non-compliant stock would be liquidated. Dr G says he did receive this message. However, as he was aware ADRs can be held within an ISA account, he didn’t believe he needed to take any action.

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I’m not persuaded that this is a reasonable position to take. As already explained, an execution only client is responsible for the actions taken when it comes to investing. Advice was being given by IBUK about positions held by Dr G. It would be reasonable to expect Dr G to either seek advice, or contact the business, about the message received. And to then decide, based on a reasonable amount of information gathered, what would be the best next step to take with his positions. I’ve not seen any suggestion by Dr G that he took steps to clarify his understanding or seek to actively resolve this matter before the deadline offered by IBUK. The business has explained that the lack of reply from Dr G meant it had no choice but to take the action it did and liquidate his investments in this ADR. And I agree with this approach. I’m therefore of the view that communication around this matter when the problem came to light was fair and reasonable. And because IBUK attempted to put matters right in a fair and reasonable way, I don’t find the business responsible for the losses Dr G incurred when his positions were sold. Furthermore when this complaint was escalated for an Ombudsman’s decision, I asked IBUK to provide more information. This included statements for Dr G’s account between 2024 and 2025 so I could see what happened with the price of his ADR stock. Having reviewed these statements, I can see there was some fluctuation in price, but nothing drastic or that suggests Dr G’s stock was sold at the worst possible time. Putting things right Our service has guidance on when it is appropriate (and not appropriate) to award a financial remedy for distress and inconvenience. This guidance is available on our website. Our guidance says that an award of between £100 and £300 is appropriate where the error has caused an impact that has been more than just minimal, which requires reasonable effort to sort out, and which causes a level of disappointment and loss of expectation. Thinking about Dr G’s complaint, my view is that he was able to purchase positions within an ISA account when he shouldn’t have been. And this has put him to a level of effort beyond minimal to sort the situation out. The fact that positions had to be liquidated caused a level of disappointment and loss of expectation. As such, a financial remedy of £100 is fair and reasonable to resolve the impact this issue caused Dr G. My final decision I partially uphold Dr G’s complaint, and direct a financial remedy of £100 to be paid to Dr G for distress and inconvenience caused. Under the rules of the Financial Ombudsman Service, I’m required to ask Dr G to accept or reject my decision before 23 April 2026. Emily Bowyer Ombudsman

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