It is the second summons of this nature the company has received in the past three months. The outcome could have implications for thousands of other investors.
The claimant, Alan Harrison, is suing the company for losses of £334,668, plus interest and costs. He claims that between 1997 and 2002, Brewin invested his money excessively in high-risk telecommunications, media and technology stocks, gave bad advice about split-capital investment trusts and failed to ensure that equities amounted to only the required percentage — 50% — of his portfolio.
Charlotte Black, Brewin’s marketing director, said: “We will be vigorously and confidently defending this case.”
There are two ways you can seek compensation from a portfolio management company if you feel it has mismanaged your money: complain to the Financial Ombudsman Service or go to law. Whichever route you take, poor performance alone will not secure compensation because investment firms are not required to provide specified returns unless they guarantee to do so.
The Harrison case therefore hinges on whether he can prove that his instructions were not followed. The money was invested by Brewin while managing his account on a discretionary basis, which means the firm was responsible for choosing stocks, subject to Harrison’s instructions.
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David Cresswell of the ombudsman service said: “The way we judge a case has nothing to do with the subsequent performance of an investment. Instead we look at how the risk profile was measured, and try to determine whether management of the funds followed the pattern agreed at the outset.”
You may also have to prove that your manager’s actions could not be explained by market sentiment at the time.
Cresswell said: “It is important not to view complaints about investment performance with the benefit of hindsight, but to consider what was known in the marketplace then. We often look at a cross-section of what a portfolio manager’s peers were doing at the time.”
Complaining to the ombudsman, which costs nothing, does not prevent you taking your dispute to court if your case is rejected. However, the ombudsman generally refuses to investigate cases that have failed in a court of law.
Complaints against companies not registered with the Financial Services Authority must be dealt with by the courts, because such cases are outside the ombudsman’s jurisdiction. The courts are the only option for recovering losses of more than £100,000.
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You must also go to law if you leave it too long to complain. The ombudsman will consider cases only after you have exhausted a company’s complaints procedure, but you must complain within six months of receiving a final response letter.