This article was written by Christina Evered 


The High Court has rejected an application by Portal Financial Services LLP (“Portal”) seeking judicial review of several decisions made by the Financial Ombudsman Service (“FOS”) in relation to advice it gave on pension transfers.

Portal is regulated by the FCA  with permission to advise on pension transfers. Portal had a ‘working arrangement’ with third-party advisory firm, Cherish Wealth Management Limited (“Cherish”). Cherish was the representative of Shah Wealth Management Limited (“Shah”), a financial advisory firm authorised by the FCA which did not have the regulatory permissions to provide pensions transfer advice.

The aim of the working arrangement was for Portal to advise Cherish’s clients on the suitability of transferring their existing pension arrangements under occupational or personal pension schemes into a self-invested personal pension (“SIPP”).

Portal undertook due diligence in relation to Cherish, however unbeknown to Portal the majority of the clients were advised to invest a portion of their pension in high-risk unregulated collective investment schemes (“UCIS”) and suffered loss as a result. Both Cherish and Shah have since become insolvent, and the clients made complaints to FOS in relation to the transfer advice they received from Portal. Portal was held to be 100% responsible for the losses suffered by the clients as a result of the unsuitable pension transfer advice.

Grounds for challenge

Portal sought judicial review of the FOS’s decisions based on three principal grounds:

Ground 1

Portal argued that the FOS acted irrationally in concluding that industry “Alerts” circulated by the Financial Services Authority (as FCA was at the time) represented “good industry practice” or that there was an error of law in failing to apply the principles to the arrangement that Portal and Cherish’s were working too, complaining in effect that Portal was being asked to underwrite advice provided by a different regulated advisor.

The FOS had decided that the “Alerts” referred to Principles 1, 2 and 6 which in themselves are wide in scope and application. In applying these principles, the FOS had determined that Portal was not entitled to disregard the suitability of the underlying investments when advising on the suitability of the pension transfer (or rely on Cherish to determine the suitability of the investments). Cherish had not provided any meaningful information about the intended investments and Portal did not carry out any further due diligence to ensure the investments were suitable for the clients. The High Court found there was no error in law in how the FOS had applied the rules and principles in reaching its conclusions.

Ground 2

Portal also argued that the FOS failed to take account of the “reasonable assumptions” that Portal was entitled to make under COBS 19.1.2R, which says it should:

“compare the benefits likely (on reasonable assumptions) to be paid on a defined benefits pension scheme with the benefits afforded by a personal pension scheme… before it advises a retail client to transfer out of a defined benefits pension scheme.”

The Court concluded that the FOS did consider the comparative exercise that Portal had carried out and gave fully reasoned grounds for the conclusion that advice to leave the defined benefit schemes was not suitable because those receiving the advice would, irrespective of investment in UCISs, have been better off remaining within them. Therefore, it was determined that Portal failed in its duty to properly advise on the suitability of the pension transfer and Portal’s challenge amounted to a disagreement with the FOS’s decision rather than any convincing argument that it was unlawful.

Ground 3:

Portal argued that the FOS had failed to take into account relevant law and good practice and use the fair and reasonable test to determine if an advisor is liable, and accordingly that Portal should not be 100% liable - as Cherish was partially responsible for the loss suffered, this 100% liability would not have been the outcome at common law. Portal also seemed to have made an implicit argument that the availability of FSCS awards should have been taken into account by the FOS when determining damages. This argument failed because FOS is not required to conduct an exercise to determine how damages might be apportioned in a civil action involving other parties. The judgment notes this was further complicated by the FSCS argument made, however it makes no decision on this point. The FOS determined it was fair and reasonable that Portal should account for the full losses as they gave unsuitable advice and could have prevented the transfers into the UCIS by carrying out further checks on the underlying investments to ensure the overall transfer was suitable.


The application for judicial review was dismissed on the basis that the decisions of the FOS were lawful and within their powers and not open to any challenge.

Key takeaways 

The judgment emphasises that the purpose of the Ombudsman is for consumers to pursue complaints without recourse for the courts, and that FOS is obliged to reach decisions which are fair and reasonable in the circumstances. It did so in this case. It is therefore a strong indication of support from the Court of the flexibility of the FOS decision making process, with the Judge treating the FOS’s decision in this case with real deference.

The judgment says that the case does not give rise to any important industry-wide issue as to the relationship between advisers or the ability of firms to rely on the actions of other regulated firms or to limit the scope of their liabilities. However, it does suggest that the outsourcing of pension transfer advice by advisors who do not have that permission to firms that do, needs to be treated with care. All authorised firms have to understand the scope of their duties and fulfil them, and cannot rely on those duties being performed by another regulated firm. It further emphasises that all loss suffered by the consumer can sit at the door of advisors who have caused it, even if there are other regulated firms with duties to the same consumer.