Meteor Asset Management has refused to abide by a FOS order to return £15,000 to investors who lost money in its Lehman-backed plans, and could challenge the ruling in a judicial review.
The FOS ruled Meteor did not treat Mr and Mrs B fairly when it failed to inform them Lehman Brothers, the counterparty of their Prima Growth Plan 7, had been downgraded by Standard & Poor's from A+ to A.
Meteor's failure caused the couple a loss beyond the fall in global financial markets which occurred in 2008 and it should therefore return their capital plus interest, an Ombudsman ruled in a Final Decision in February.
The couple wrote to Meteor to accept the ruling and the redress. But in a short reply Meteor say it is "unable to process the decision made by FOS" while it takes legal advice "with a view to a potential challenge to it". It intends to correspond with the couple again, whatever the course of action, by 26 April 2011.
A Final Decision from the Ombudsman is the highest level of consumer complaint, and is legally binding on the company once accepted by the client. Meteor can apply for a judicial review into the soundness of the decision as a last resort.
Harriet Quiney, financial services partner at law firm Fishburns, says most judicial review applications fail.
"Applicants must prove the Ombudsman's decision was unreasonable. The chances of proving this are pretty slim. It's got to be a pretty barking mad decision and it doesn't look like Meteor's chances are high."
However, she says she is "slightly cynical" investors would have pulled out of the Meteor plans had they know about the Lehman's downgrade.
"Would it really have made any difference to investors? I'm not sure it would have.
"If it went to court the investors would have to prove the lack of information was material to the decision-making in each case. FOS doesn't take such a sophisticated approach."
Investors argue three other Meteor Plans also backed by Lehman's fall under the same category of complaint as that of Mr and Mrs B. If the FOS agrees Meteor could be exposed to compensation, then total claims run to £12m.
The Ombudsman ruled the Growth Plan 7 brochure clearly stated the securities would be rated A+ by Standard & Poor's.
The drop in Lehman's rating on 2 June 2008, after the sale of the product but before it went into force, was a "material fact" which Meteor should have told investors, he said in the Final Decision.
"I consider it reasonable to say this information may have led Mr & Mrs B or any prudent investor to question the security of the product they were proposing to invest in," says the Final Decision.
Meteor's lawyers CMS Cameron McKenna had argued the fall in the market, not Meteor, were to blame for the couple's loss.
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created