The Financial Ombudsman Service (FOS) has ruled advisers could not reasonably have known Lehman Brothers was in financial turmoil when they recommended clients invest in structured products to which it was counterparty, in a trio of rulings.
In separate claims handled by the ombudsman against national adviser Chase de Vere, RSM Tenon - now Baker Tilly Financial Management - and Newcastle-based Professional Wealth Management, it ruled the firms gave suitable advice to invest in Meteor Prima products, which were backed by Lehmans.
In June 2008, credit ratings agency Standard & Poor's (S&P) downgraded Lehman Brothers from A+ to A and, in September 2008, Lehmans filed for Chapter 11 Bankruptcy protection.
In a case involving Professional Wealth Management, the ombudsman has ruled a recommendation to a couple to invest £20,000 in the Meteor Prima Plus Plan 2 in June 2008 was suitable, and that it was not convinced the investors would have pulled their investment had they known about the S&P downgrade.
The complainants in that case, who also claimed the investment recommendation was unsuitable given their attitudes to risk, said they should have been informed about the downgrade and the uncertainties Lehman was facing.
But Professional argued Lehmans still had a low risk of failure and would have advised the couple of proceed regardless. The FOS did not uphold the couple's complaint.
In another case involving a recommendation by a Chase de Vere adviser to invest in the Meteor Prima Growth Plan 6, in April 2008, the client argued the adviser had not carried out adequate due diligence into Lehman Brothers and should have alerted him to the risks.
However, again, the FOS disagreed. Though the adviser did not mention Lehman Brothers by name, he explained the counterparty structure and the additional risks it entailed, the ombudsman found.
In a further case against RSM Tenon, which related to the suitability of the investment given the investor's attitude to risk, the FOS suggested the failure of Lehmans "appears to have been the trigger" for the complaint. The FOS found in favour of the adviser.
Meteor products were only sold via advised channels. In 2009, Meteor was given the all-clear by the then-Financial Services Authority over its sales and marketing of Lehmans-backed plans.
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