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Investor Wins Compensation from Finance Professionals Who Let Him Down

Investors inevitably take risks but are entitled to expect that finance professionals in charge of their portfolios will follow their instructions and manage their exposure. That certainly did not happen in one High Court case in which a businessman’s seven-figure investment shrank by more than half over a five-year period.

A successful businessman had invested £1.5 million in a portfolio run by a finance company in 2009. By the time he removed his funds in 2014, his investment was worth only £681,443. He launched proceedings against the company, alleging breach of contract, breach of statutory duty and negligence.

In upholding his claim, the Court found that he had signed up for a medium risk profile but that the company had breached its mandate by placing much of his money into higher risk assets. The company had also breached its contractual obligation to operate a stop loss policy by which it would have been required automatically to sell any investment that made a loss of five per cent.

The businessman was entitled to be compensated for his capital loss. However, the Court rejected his claim for further damages to reflect the growth that his portfolio would have achieved had it been invested in accordance with his instructions. He knew that his portfolio might not prosper, even if properly managed, and an award under that head would have the effect of removing any risk in the investment. Lawyers were left to calculate the amount of the businessman’s award.

Rocker v Full Circle Asset Management. Case Number: HQ15X01731

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