SVS Securities - shut down?

eskbanker

johnburman said:

But £350 is now the standard on the facts and that is the baseline figure to be asked for

Not sure that a single ombudsman decision immediately becomes a de facto standard or baseline, but it is difficult to see anything within this case that differentiates it from those where the slightly smaller figures have been awarded, given the fairly generic nature of the explanation, which presumably aligns with the experiences of most:

£350 (this includes ITI’s original offer of £200 and is not in addition to it) for the distress and inconvenience caused by:

o The delay in transferring her portfolio;

o The delays in transferring her cash to her bank account. 

o Other service issues including some correspondence not being replied to by ITI; and 

o Being unable to trade. 

Note also that this is another case where the ombudsman declined to increase the compensation proposed by the FOS adjudicator (which ITI had accepted), so Ms T presumably spent time and effort in the hope that she'd get more but ultimately didn't....

johnburman

All points well made but this decision is higher than the previous £250 and so yes of course it should be mentioned by other claimants with the same facts

Pecuniary losses need to be added to the 300 GBP for inconvenience 

RasputinB

eskbanker said:

johnburman said:

But £350 is now the standard on the facts and that is the baseline figure to be asked for

Not sure that a single ombudsman decision immediately becomes a de facto standard or baseline, but it is difficult to see anything within this case that differentiates it from those where the slightly smaller figures have been awarded, given the fairly generic nature of the explanation, which presumably aligns with the experiences of most:

£350 (this includes ITI’s original offer of £200 and is not in addition to it) for the distress and inconvenience caused by:

o The delay in transferring her portfolio;

o The delays in transferring her cash to her bank account. 

o Other service issues including some correspondence not being replied to by ITI; and 

o Being unable to trade. 

Note also that this is another case where the ombudsman declined to increase the compensation proposed by the FOS adjudicator (which ITI had accepted), so Ms T presumably spent time and effort in the hope that she'd get more but ultimately didn't....

We don’t know the scale of Ms T’s problems but (thanks to her escalating her case) we do now know that the FOS ombudsman agreed that there was distress and inconvenience caused.

It surely follows that if any ITI client suffered delays and / or service issues they would have a legitimate complaint?

As there were many thousand transfers from SVS to ITI and well-documented issues I think it safe to conclude that many clients experienced problems that would warrant raising complaints?

If I remember correctly you have pointed out that very few complaints have been reported by ITI as if there were more than 50 they would feature in the FOS statistics.

Surely this mean that ITI are extremely likely to be in breach of the FCA rules / guidance for dealing with complaints?

See DISP 1.3.6 where it is stipulated that a firm should consider contacting potentially disadvantaged clients who have not complained and ensure that those customers are given appropriate redress. In this context the FCA also refers to Principle 6 (Customers' interests).

eskbanker

RasputinB said:

eskbanker said:

johnburman said:

But £350 is now the standard on the facts and that is the baseline figure to be asked for

Not sure that a single ombudsman decision immediately becomes a de facto standard or baseline, but it is difficult to see anything within this case that differentiates it from those where the slightly smaller figures have been awarded, given the fairly generic nature of the explanation, which presumably aligns with the experiences of most:

£350 (this includes ITI’s original offer of £200 and is not in addition to it) for the distress and inconvenience caused by:

o The delay in transferring her portfolio;

o The delays in transferring her cash to her bank account. 

o Other service issues including some correspondence not being replied to by ITI; and 

o Being unable to trade. 

Note also that this is another case where the ombudsman declined to increase the compensation proposed by the FOS adjudicator (which ITI had accepted), so Ms T presumably spent time and effort in the hope that she'd get more but ultimately didn't....

We don’t know the scale of Ms T’s problems but (thanks to her escalating her case) we do now know that the FOS ombudsman agreed that there was distress and inconvenience caused.

Indeed, but that doesn't seem to be news, in the context of previous published decisions (and adjudications reported on here) - has there been any evidence of D&I claims being rejected?

It surely follows that if any ITI client suffered delays and / or service issues they would have a legitimate complaint?

Agreed, although the above comment obviously applies, i.e. that we don't know the scale of others' problems.

As there were many thousand transfers from SVS to ITI and well-documented issues I think it safe to conclude that many clients experienced problems that would warrant raising complaints?

Seems likely, yes.

If I remember correctly you have pointed out that very few complaints have been reported by ITI as if there were more than 50 they would feature in the FOS statistics.

Yes, although whether that's caused by few complaints being made or few being reported is a potentially significant distinction!

Surely this mean that ITI are extremely likely to be in breach of the FCA rules / guidance for dealing with complaints?

See DISP 1.3.6 where it is stipulated that a firm should consider contacting potentially disadvantaged clients who have not complained and ensure that those customers are given appropriate redress. In this context the FCA also refers to Principle 6 (Customers' interests).

I guess it comes down to the FCA's interpretation of what's relevant and significant enough to trigger that - as I recall, TSB made proactive redress offers to non-complainants after their well-publicised system fiasco a few years ago and I think there have been various credit card providers (e.g. Barclaycard?) who've contacted customers after inappropriate lending decisions, but there have been many other high-profile problems where banks have essentially expected affected customers to contact them.

However, if the FCA considered that every institution providing poor service during the pandemic should be expected to contact all of its customers and offer redress for distress and inconvenience, then that would have some far-reaching ramifications!

I presume that much comes down to how the FCA interpret DISP 1.3.6's "recurring or systemic problems", as FOS seem to be swayed by ITI's argument that their issues arose from specific IT system problems - the FCA did seem to buy into this in October 2020:

"This is a consequence of IT system failings and errors which ITI has been working to resolve.

"We have held regular discussions with ITI on how it has sought to address these outstanding issues and delays as soon as possible, including responding appropriately to clients and taking steps to ensure they do not suffer financial detriment as a consequence of ITI’s actions.

"As a result of these discussions, ITI has taken a number of steps to improve its ability to provide the services its clients expect, but we recognise that further progress is still required."

The spokesperson said the FCA was keeping the situation with ITI Capital under "close review". 

I don't know how much can be read into their reference to "responding appropriately to clients", as opposed to proactively contacting them, or if the subsequent FCA enforcement action against ITI explicitly mentioned these issues?

Comments inline above....

RasputinB

eskbanker said:

RasputinB said:

eskbanker said:

johnburman said:

But £350 is now the standard on the facts and that is the baseline figure to be asked for

Not sure that a single ombudsman decision immediately becomes a de facto standard or baseline, but it is difficult to see anything within this case that differentiates it from those where the slightly smaller figures have been awarded, given the fairly generic nature of the explanation, which presumably aligns with the experiences of most:

£350 (this includes ITI’s original offer of £200 and is not in addition to it) for the distress and inconvenience caused by:

o The delay in transferring her portfolio;

o The delays in transferring her cash to her bank account. 

o Other service issues including some correspondence not being replied to by ITI; and 

o Being unable to trade. 

Note also that this is another case where the ombudsman declined to increase the compensation proposed by the FOS adjudicator (which ITI had accepted), so Ms T presumably spent time and effort in the hope that she'd get more but ultimately didn't....

We don’t know the scale of Ms T’s problems but (thanks to her escalating her case) we do now know that the FOS ombudsman agreed that there was distress and inconvenience caused.

Indeed, but that doesn't seem to be news, in the context of previous published decisions (and adjudications reported on here) - has there been any evidence of D&I claims being rejected?

It surely follows that if any ITI client suffered delays and / or service issues they would have a legitimate complaint?

Agreed, although the above comment obviously applies, i.e. that we don't know the scale of others' problems.

As there were many thousand transfers from SVS to ITI and well-documented issues I think it safe to conclude that many clients experienced problems that would warrant raising complaints?

Seems likely, yes.

If I remember correctly you have pointed out that very few complaints have been reported by ITI as if there were more than 50 they would feature in the FOS statistics.

Yes, although whether that's caused by few complaints being made or few being reported is a potentially significant distinction!

Surely this mean that ITI are extremely likely to be in breach of the FCA rules / guidance for dealing with complaints?

See DISP 1.3.6 where it is stipulated that a firm should consider contacting potentially disadvantaged clients who have not complained and ensure that those customers are given appropriate redress. In this context the FCA also refers to Principle 6 (Customers' interests).

I guess it comes down to the FCA's interpretation of what's relevant and significant enough to trigger that - as I recall, TSB made proactive redress offers to non-complainants after their well-publicised system fiasco a few years ago and I think there have been various credit card providers (e.g. Barclaycard?) who've contacted customers after inappropriate lending decisions, but there have been many other high-profile problems where banks have essentially expected affected customers to contact them.

However, if the FCA considered that every institution providing poor service during the pandemic should be expected to contact all of its customers and offer redress for distress and inconvenience, then that would have some far-reaching ramifications!

I presume that much comes down to how the FCA interpret DISP 1.3.6's "recurring or systemic problems", as FOS seem to be swayed by ITI's argument that their issues arose from specific IT system problems - the FCA did seem to buy into this in October 2020:

"This is a consequence of IT system failings and errors which ITI has been working to resolve.

"We have held regular discussions with ITI on how it has sought to address these outstanding issues and delays as soon as possible, including responding appropriately to clients and taking steps to ensure they do not suffer financial detriment as a consequence of ITI’s actions.

"As a result of these discussions, ITI has taken a number of steps to improve its ability to provide the services its clients expect, but we recognise that further progress is still required."

The spokesperson said the FCA was keeping the situation with ITI Capital under "close review". 

I don't know how much can be read into their reference to "responding appropriately to clients", as opposed to proactively contacting them, or if the subsequent FCA enforcement action against ITI explicitly mentioned these issues?

Comments inline above....

Thanks to your comments and DRN-3112315 (an earlier decision) I think I can explain how problems arose for most of the ex-SVS clients.

“ITI Phoenix” is actually an Interactive Brokers account with a portal labelled ITI Phoenix. As I am a client of Interactive Brokers I can see what happens when positions are transferred in.

These can be done manually, which is a long tedious process, or they can be imported using a CSV file. The complete database of the transfers from SVS is in the public domain and from that we can see that the holdings are identified by their ISIN. This is a 12-digit alphanumeric code that uniquely identifies a specific security. But it does NOT identify the currency type of the security.

If you try to import electronically and the Interactive Brokers system needs more information then the importation will stop. If done manually the system will list the exchanges on which the security is traded and the correct exchange can be chosen.

In the case of DRN-3112315 I suspect that the default exchange was used and the client became puzzled as they thought they held in GBP but in order to perform the import it was flipped it to USD (or that was the default). ITI said that is how the security came over from SVS but I do not think that is anything like the full story. Maybe enough to bamboozle the FOS ombudsman in one isolated case but when you look at the bigger picture, i.e. the whole SVS database, I think that the problems become obvious.

I believe that ITI expected to be able to import the SVS client’s holdings into “their” Phoenix platform electronically. But the underlying system with Interactive Brokers wouldn’t be able to accept the majority of the portfolios without further information. Chances are that ITI realised that not all imports would go smoothly and had their old Russian system, QORT, as a backup. Those of us unfortunate enough to have had holdings on the QORT system know how totally inadequate that system was even for simple portfolios so it is easy to understand how it would have become overwhelmed.

In ITI’s defence they can point out that they are regulated by the FCA and that the FCA agreed to the transfer from SVS to them. It would appear to me that the FCA’s oversight was inadequate and therefore the FCA is implicated in the transfer problems.

That may explain why they appear to have taken little regulatory action apart from persuading ITI to continue to not take on new clients. This has been since 16 Dec 2020 and may tie in with your comment that “the FCA did seem to buy into this in October 2020”.

My argument will be that the specific IT system problems, as explained above, would have been anticipated by any competent stockbroker, and by the FCA's representative. It was ITI's own in-house system that had recurring systematic problems and was not fit for purpose. (Maybe an existing ITI client can confirm that it has been replaced recently?)

RasputinB

Recently added to Ombudsman decisions (financial-ombudsman.org.uk)
DRN-3454178 - £150 D&I payment. ITI offered £75

eskbanker

RasputinB said:

Thanks to your comments and DRN-3112315 (an earlier decision) I think I can explain how problems arose for most of the ex-SVS clients.

[explanation]

Your theory about the underlying technical issue sounds plausible!

RasputinB said:

In ITI’s defence they can point out that they are regulated by the FCA and that the FCA agreed to the transfer from SVS to them. It would appear to me that the FCA’s oversight was inadequate and therefore the FCA is implicated in the transfer problems.

That may explain why they appear to have taken little regulatory action apart from persuading ITI to continue to not take on new clients. This has been since 16 Dec 2020 and may tie in with your comment that “the FCA did seem to buy into this in October 2020”.

My argument will be that the specific IT system problems, as explained above, would have been anticipated by any competent stockbroker, and by the FCA's representative.

Personally I'm not convinced that there's some sort of collusion between the FCA and ITI if that's what you're suggesting - if ITI had been operating adequately prior to the SVS debacle then it's easier to see the transfer-related technical issues with hindsight rather than in advance, so I think it's a stretch to suggest that the FCA are implicated as such - there's obviously no dispute that they authorised the transfer, but it seems far from a given that they should have spotted the system compatibility issue if that was the root cause.

My comment about October 2020 was intended only to illustrate that the FCA seemed to accept that the delays were caused by technical issues as opposed to, say, inadequate resourcing or process weaknesses, i.e. they didn't see the problem(s) as systemic.

RasputinB said:

It was ITI's own in-house system that had recurring systematic problems and was not fit for purpose. (Maybe an existing ITI client can confirm that it has been replaced recently?)

If your point here is to try to make a case to the FCA that under DISP 1.3.6 ITI should proactively contact and compensate customers, then IMHO it would be worth focusing on the actual wording of that clause, in that it refers to "recurring or systemic problems", not 'systematic' ones.  I'd interpret 'recurring' to mean something that happens multiple times, e.g. every month or every time an account is opened, etc, rather than one that lasts a while, and 'systemic' effectively means embedded in processes rather than relating to systems in the technology sense, so an IT problem leading to widespread delays wouldn't necessarily meet the threshold.

Perhaps also worth noting that DISP 1.3.6 is still caveatted with all sorts of ifs and buts ("consider whether it is fair and reasonable for the firm to undertake proactively a redress or remediation exercise, which may include contacting customers who have not complained") rather there being an absolute obligation to act.


Anyway, I should maybe clarify again that I'm not defending ITI or the FCA here but simply offering alternative interpretations - it'll be interesting to see what happens if you go to the FCA, but do you have anything else in mind if they live down to your expectations and insist that no further action is needed?

eskbanker

RasputinB said:

Recently added to Ombudsman decisions (financial-ombudsman.org.uk)
DRN-3454178 - £150 D&I payment. ITI offered £75

So £150 is the new standard, and anyone awarded a higher payment should refund some then?

I see that this ombudsman reiterates the FOS position about not compensating for time by the hour:

He said he also spent 20 to 30 hours of his time either waiting on the phone or emailing ITI, and it was therefore ‘extremely disrespectful’ that I valued his time at around £6 per hour. 

[...]

I should start by making clear that the award of £150 is not intended to value Mr B’s time. It is intended to be a fair and reasonable award for the inconvenience Mr B was caused – and whilst I can understand why Mr B has estimated the hours he spent trying to resolve the matter, I don’t consider that’s a fair and reasonable way to decide how much compensation to award for the distress and inconvenience he experienced. 

Presumably Mr B's first name isn't Rasputin....?

johnburman

The overall point of these posts - for me at least - is to make sure all those who "lost out" as a result of ITI claim compensatino.  It is not generous, but the FOS award more than ITI seems to offer.  For non-pecuniary losses i.e. inconvenience £300 seems to be the going rate.  It should be claimed by all clients.  As to the FCA I have raised a
Disp  1.3.6 point with them.  We will see what transpires...if anything. But there must be many hundreds of clients who have received no comp.

And I agree that DISP 1.3.6 is still caveated with all sorts of ifs and buts ("consider whether it is fair and reasonable for the firm to undertake proactively a redress or remediation exercise, which may include contacting customers who have not complained") rather there being an absolute obligation to act.  

But is that ITI doing the "considering", the FCA, or the reasonable man?

RasputinB

johnburman said:

As to the FCA I have raised a Disp  1.3.6 point with them.  We will see what transpires...if anything. But there must be many hundreds of clients who have received no comp.

Did the FCA confirm that they will pass on to their investigation team and give you a case number?