Which case won?

The case for the financial adviser
  • We had no way of knowing that the emails we were receiving from Ms Q’s email address had not actually been sent by her.
  • It was not unusual for us to receive emails from Ms Q. She had been emailing us around the same time about arranging a mortgage, so the emails asking us to transfer money to another bank account did not give us any cause for suspicion or concern.
  • Ms Q had worked in Asia in the past, so it would not have been unreasonable for her to have a bank account in Hong Kong.
  • It was not our email account which was hacked by fraudsters – it was Ms Q’s. We can hardly be held responsible for her email security but have nevertheless offered to pay a quarter of the sum that Ms Q has lost.
The case for Ms Q
  • I had used the same financial adviser for more than ten years and always had a face-to-face meeting when I wanted to discuss my investments.
  • The financial adviser was informed by the investment provider that they could not trace the firm of the Hong Kong solicitor to which the money was initially meant to be transferred. This should have alerted the adviser that something was wrong.
  • The financial adviser should have called me to confirm the instructions they received by email prior to transferring such a large sum of money.
  • I had entrusted my money to the financial adviser who should have taken better care of it. The advisor should reimburse me the full ‎£80,000 that they transferred to a fraudulent account, not merely a quarter of this sum.

So, which case won?

Cast your judgment below to find out
Case A Case B

Case B won. You were right!

How people voted
case a29%
case b71%

Expert commentary on the court's decision

Clayton Davis
Clayton DavisPrincipal Lawyer
“In the Financial Ombudsman’s view, ‘alarm bells should certainly have started ringing’ when the financial adviser learned of the irregularities with the initial transfer request.”
Financial Ombudsman finds in favour of Ms Q

The case involving Ms Q and her financial adviser was reported in the August 2016 edition of ombudsman news. (See case study 135/6.)

After examining the emails which the financial adviser had received from Ms Q’s email account, the Financial Ombudsman sided with Ms Q, agreeing that the financial adviser should have taken better care of her money and could have prevented the fraud.

The factor that was of central importance in the reasoning of the Financial Ombudsman was that the investment provider had notified the financial advisor that it could not trace the firm of Hong Kong solicitors who were initially meant to receive the money.

Financial adviser told to pay full amount of unrecovered funds

In the Financial Ombudsman’s view, “alarm bells should certainly have started ringing” at this point and the obvious course of action for the financial adviser would have been to ring Ms Q to confirm her instructions.

The Financial Ombudsman ordered the financial adviser to pay the investment provider the full amount of the money which had not been recovered, so that Ms Q did not suffer any loss as a consequence of the scam.

Australian investors equally at risk

While this case took place in the UK, there are similar cases that have been reported by the Financial Ombudsman Service Australia (FOS).

In one case heard by FOS in 2016, for example, an investor lost $360,000 in credit card payments to a scam (See Case number: 404469, 18 April 2016, Financial Ombudsman Service Australia).

The investor’s Financial Services Provider (FSP) had been notified of the scam by ASIC two weeks earlier but had done nothing to warn the investor. Further, the FSP’s fraud area had become suspicious after the first three transactions, yet subsequent transactions were nonetheless allowed to proceed.

FOS determined that the FSP’s processes should have detected and blocked the transactions after the first three transactions. The FSP was told to pay the investor an amount equal to 75% of the payments made to the scammers after the first three transactions, with the investor being responsible for the balance of the losses due to his own failure to protect his interests.

For more information please see the articles below.

Protect yourself against payment redirection scams

Business email compromise scams conning Australians out of millions

“I lost my money in a cryptocurrency scam. My financial firm should have warned me.” Which case won?

NOTICE: This article is accurate as at the time of publication and does not constitute legal advice. Please see our legal notices page for more information. Information related to coronavirus can be outdated very quickly.

Latest from Stacks

chat button

Fill out this form and one of our local law professionals will be in contact

By submitting this form you agree to the terms of our Privacy policy