MET Facilities LLP · DRN-6252978

The complaint Mr J complains MET Facilities LLP (MET) is responsible for losses he has suffered from an investment he made into a bond that was arranged by one of its representatives. He says the bond was inappropriate for his circumstances and shouldn’t have been promoted to him. What happened In May 2019, Mr J invested £100,000 in an Audley Funding Bond. The bond was due to provide a return of 12% per year, with capital due to be repaid in 2022. Mr J was first introduced to the opportunity by a third party, who explained the investment and directed him to an appointed representative (AR) of MET, Ipsum to complete his application. Ipsum provided the on-line portal through which investors could apply to purchase the bonds and through which administrative services were managed. Mr J applied through this process and also declared himself as a High-Net-Worth (HNW) investor. Initially Mr J received his interest payments but subsequently he had problems receiving the expected returns. It later became apparent the bond issuers company had run into financial difficulties and entered administration. In May 2024, Mr J raised a complaint with MET as he hadn’t had his expected interest paid or capital returned. In June 2024, MET provided its final response letter for the complaint. In summary it said: • Ipsum provided an online portal through which clients could invest. It did not make personal recommendations or have a discretionary management role. • Ipsum’s risk warning specifically warned that the bond might not be liquid and investors might suffer capital losses. The customer classification document signed by Mr J on 5 April 2019 confirmed that he understood that his capital would be at risk. • MET’s only obligation was to make sure that the investments that it promoted to Mr J were appropriate. He held around £600,000 in other investments, including a private wealth investment offering, loans notes invested in property. Based on this information, it appears that he had experience of investing in similar investments prior to investing in the bond. So it concludes the bond was appropriate for him, given his background and investment history. Mr J didn’t accept the outcome, and referred his complaint to this service for an independent review. I issued a provisional decision in March 2026. This is what I said: “The bond Mr J invested in isn’t a mainstream product, but rather a complex instrument and the structure of the investment meant the risks were multifaceted. I haven’t found that MET’s AR, Ipsum provided Mr J with regulated investment advice, so this was not a normal advised investment and the normal rules about the suitability of advice

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in COBS 9 do not apply. But in arranging for Mr J to invest in the bond through its online process, MET has accepted that due to the nature of the investment, the appropriateness rules in COBS10/10a do apply. So it is not in dispute that MET had regulatory obligations it needed to follow when dealing with Mr J. A first point to make is that appropriateness is not the same as suitability – it is not an assessment of whether the proposed investment is suitable for the investor’s objectives, attitude to risk etc. An appropriateness assessment is a determination of whether the client has the necessary experience and knowledge in order to understand the risks involved in relation to the product or service offered or demanded. There is some evidence Ipsum did carry out an appropriateness assessment as required. I note at the time of the sale in 2019, Mr J signed a declaration to indicate he met the criteria of a High Net Worth (HNW) investor and acknowledged he could lose assets from making investment decisions based on financial promotions and that he had read and understood the risk. He also answered a series of questions, in a section titled ‘Appropriateness Test for Complex Bond Products’. This section explains that the FCA rules require it checks that you understand the nature and risks of investing in this type of product. Mr J was required to answer a series of questions – including questions about investment strategies, understanding his capital was at risk and there are no guarantees, diversity risk and liquidity risk. Mr J answered these questions to indicate he did have understanding. But the questions asked were limited and, there was little information gathered to support he had existing experience, and no detail of the sorts of transactions he’d been involved with, and how often he’d traded those products. I note an appropriateness assessment does not necessarily mean that only investments of a type an investor has made before are appropriate, and the crux of the issue is about understanding the risks involved in the investment. But I do have some concerns about how the assessment was carried out. Mr J says he was looking for an income, and this investment ticked the boxes as it had a senior security which gave underlying protection. He understood the investment itself was in an old gold and minerals mine and the deposits shown to be recoverable were impressive. He says he was given reassurance by the introducer who led him to believe this investment was protected and if there were any issues the security would kick in and cover his capital invested. Although, I note some of this information is contrary to the answer he gave about his understanding of the risks in the appropriateness test – for example that he understood his capital was at risk. In my view, the evidence in the application does suggests it is more likely than not that Mr J would have understood there were additional risks involved in investing in a non-mainstream complex bond – including the fact the bond could not be easily sold or transferred and there was a risk to his capital. Mr J has explained that he relied on the introducer to explain various investment opportunities. He said he invested in another complex instrument with a different structure around the same time as his contribution to the Audley Funding bond in 2019. He also had a significant portfolio (which was valued at around £600,000) of investments across a range of assets that he had taken out through another adviser. As he was working abroad, he intended for the savings in this investment portfolio to support his retirement. While he questions whether he should have been classed as having a HNW status, the declaration he signed sets out the criteria for this and the information he has provided in his complaint submissions does suggest this is accurate and he did indeed meet the criteria.

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Mr J doesn’t appear to have had specific knowledge or experience about investments from his employment history, and he said he had relied on financial advice in the past to make investments. But I note he had a held a director position at the time he invested and was a Health and Safety Executive. So, I think it is reasonable to conclude he would have been aware of the importance of providing accurate information when making declarations in the application process. It is my view, Mr J would have been aware that the investment he was making was not a mainstream product. The application process indicated that there were restrictions to who could take out the investment and it was made was clear it was a complex bond. Mr J says the introducer led him to understand this was a secure investment. He has suggested that Ipsum allowed the introducer to set him up to go into an investment that was advertised as secure and protected when in fact it was not. But I haven’t seen anything to suggest Ipsum or MET had any connection with the introducer or would have been aware of anything Mr J was told by it. Indeed, MET has been clear it did not have an introducer agreement with the third-party Mr J dealt with and there was no relationship with Ipsum or MET. Taking all of the above into account, if Ipsum had carried out a more detailed and structured assessment it is reasonable to conclude that Mr J had the necessary knowledge and experience to understand the risks involved in the investment. Based on the evidence that was collated in the application and the further information gathered about Mr J’s circumstances at the time of investing, he was in a position to understand the risks. But that said, I haven’t seen that he did have significant investment experience in this type of instrument prior to his investment in the Audley Funding bond. So, I this is a finely balanced consideration. I accept that it is possible that a more thorough appropriateness assessment in accordance with the rules might have concluded that the investment was not appropriate for Mr J. But even if an assessment led to such a conclusion, a firm is not obliged to prevent the client from investing. The rules permit a firm to warn a client that an investment is not appropriate for them. The client may then make a decision about whether or not to continue. And if the client decides to go ahead the firm then has to decide how to proceed. I have considered Mr J’s actions in this matter. He was introduced to the investment by a third party who he appears to have trusted and reassured by. And it appears he was seeking other investment opportunities of a similar nature around the same time. As already mentioned, he knew this was not a routine investment and he was contributing a fairly large amount of money, although I appreciate this is relevant to his HNW investor status. In my view, the evidence here shows that Mr J was motivated to make the investment. In all the circumstances I am not able to find that it is more likely than not that Mr J would have decided not to invest in the Audley Funding Bond if Ipsum had warned him that the investment might not be appropriate for him. And as I’ve already indicated that I think there is persuasive argument that the bond was appropriate for him anyway, I don’t consider in this finely balanced situation, it would be reasonable for Ipsum to be obliged to decide not to allow Mr J’s investment to proceed if he chose not to heed a warning that the investment was not appropriate. I haven’t seen full detail of the factors that led to the failure of the investment, but equally I haven’t seen anything to indicate that the investment must have been so fundamentally flawed in some way that it should never have been arranged. I note the bond was listed on a recognised exchange and the financial promotion it was based had the required regulatory approval. Mr J hasn’t provided any detail of specific fundamental issues that should have been discovered with reasonable due diligence. Also, apart from the investment being

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obviously high risk, investors did have an opportunity to carry out their own due diligence on it before investing.” Mr J’s representatives responded on his behalf and provided further submissions for me to consider. In summary they said: • The investigator concluded that the appropriateness test conducted by MET/Ipsum was not adequate, but the provisional decision states that although the assessment was limited, it provided sufficient evidence that Mr J “did understand” the risks and complexities involved. There is no explanation for why the “limited and lacking detail” assessment now becomes reliable and sufficient evidence of knowledge, particularly where complex instruments are involved and where COBS 10A explicitly requires assessment “relevant to the specific type of product… including their complexity and the risks involved.” • It is asserted that even if a warning had been issued to Mr J that the bond was not appropriate for him it is not likely he would have declined the investment because he appeared “motivated” to invest. The determination rests on a subjective interpretation of Mr J’s motivation, rather than relying on the regulatory context of warnings under COBS 10A.3.1R, Mr J’s history of relying on professional financial advice and his lack of prior complex-product investment experience. There is no reasoning why the objective, evidence-based view should be replaced by a speculative assertion that Mr J would have ignored a formal appropriateness warning. • It is concluded Mr J was sufficiently experienced to understand the complexities of the product and that his HNW declaration is strong evidence of this. Being HNW does not equate to having knowledge and experience in complex bonds, and the COBS rules indeed treat these as separate concepts. This is not addressed, nor explained why a HNW status is taken as a proxy for product-specific experience when the FCA rules expressly forbid this assumption. • The influence of the introducer has been dismissed on the basis MET had no relationship with the introducer. It is relevant to how Mr J actually formed his impression of the investment, and how the appropriateness assessment should have identified those misunderstandings. If the appropriateness questions failed to uncover that Mr J believed the investment was protected (despite answering “capital at risk”), this demonstrates that the test was not fit for purpose. • The bond was complex, structurally opaque, and required a proper appropriateness assessment that MET failed to conduct. The product’s specific risks were not properly assessed nor understood. COBS requires product-specific assessment— not general assumptions based on wealth or unrelated investments. 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’ve considered the further submissions Mr J’s representatives have made in response to my provisional decision alongside all of the other evidence submitted. Having done so, I haven’t found reason to change the outcome. I’ll explain why. Firstly, I acknowledge the disagreements with the provisional decision set out by Mr J’s representatives and that they believe the investigators’ findings were consistent the FCA rules. But I’m not bound by the earlier assessment, and I considered everything afresh when reaching my findings, taking into account the relevant rules and guidance – including those set out in COBS 10A.

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Mr J’s representatives say COBS 10A explicitly requires a firm to carry out an assessment “relevant to the specific type of product… including their complexity and the risks involved”, so there is no explanation for why a “limited and lacking detail” assessment is reliable and sufficient evidence of knowledge. I note the points made about the complexity of the bond, and as set out previously, I agree the bond was a complex instrument and the structure of the investment meant the risks were multifaceted. I also acknowledge the comments about being a HNW investor does not equate to having knowledge and experience in complex bonds. It is suggested I have taken Mr J’s HNW status as a proxy for product-specific experience when the FCA rules expressly forbid this assumption. I confirm this isn’t a finding I have made, and I don’t draw the conclusion that has been implied based on Mr J’s HNW status. It is a factor in his overall circumstances, but I don’t find it determinative when assessing whether the bond was appropriate for him. I accept there were deficiencies in how the relevant appropriateness obligations were met, specifically in terms of the information gathered to allow for an assessment to be made. I didn’t make a finding to say a compliant process had been followed. Rather I said it is possible that a more thorough appropriateness assessment in accordance with the rules might have concluded that the investment was not appropriate for Mr J. This is why I went on to consider the client warning part of the rules. I’ve considered the points made about the impact a warning would have had on Mr J. It is disputed he would have continued to proceed and argued an evidence-based view (considering Mr J’s history of relying on professional financial advice and his lack of prior complex-product investment experience) should be taken rather than a speculative assertion that he would have ignored a formal appropriateness warning. While it is argued a speculative assertion has been made, in reaching my finding, I have considered the information Mr J has provided about his previous investment experience and understanding of the bond, alongside his wider circumstances and the information gathered during the application process. This is a difficult decision as it’s not completely clear what course of action Mr J would’ve taken. Therefore, I must make a decision based on the balance of probabilities i.e. what I think is more likely than not to have happened. In support of Mr J declining to proceed after a warning, his representatives point to him historically relying on professional financial advice. But he was pursuing this investment opportunity (and another loan note investment around the same time), outside of the usual advisory process. So, it does seem he did have some appetite for making decisions without seeking formal regulated advice – and I think it likely he understood the difference. It is also argued that Mr J lacked prior complex-product investment experience. But there is evidence from his answers to the appropriateness questions in the application that he did understand the difference between investing in complex bonds and more mainstream investments like trading FTSE shares and government bonds. While neither of the above points are conclusive in determining what action Mr J would have taken if he was given a warning, taking into account what I know of his financial position and wider circumstances, I find it plausible he would have continued with this investment even if a warning was provided. I need to take a view without the benefit of hindsight, and knowing the investment has failed. Mr J’s testimony suggests he did have some understanding of what he would be investing towards by purchasing the bond, and his expectations for the investment were positive based on the understanding he gained from the information he reviewed. While finely balanced, I find it most likely Mr J would have proceeded even if a warning was given.

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Lastly, I note Mr J’s representatives’ comments on the influence of the introducer. They say this is relevant to how Mr J formed his impression of the investment, and whether the appropriateness test was fit for purpose. The application Ipsum received was from Mr J. I’ve also not seen that it had any interactions with the introducer, or it had any awareness of the extent of the role the introducer was playing in the transaction. In deciding this complaint, I’m considering the actions of Ipsum when arranging the bond, so in this respect the regulatory responsibilities are on MET. Based on the information in the application, there is some evidence to suggest Mr J was aware his capital was at risk regardless of any prior understanding. But in any case, as I’ve covered above, I have considered the possibility of the appropriateness assessment not being sufficient for MET to meet its obligations, and this hasn’t led me to uphold the complaint. In all the circumstances I do not consider that it is fair and reasonable to require MET to compensate Mr J for the losses he has suffered as a result of his investment in the Audley Funding bond. My final decision I do not uphold this complaint. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr J to accept or reject my decision before 24 April 2026. Daniel Little Ombudsman

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