The Financial Services Ombudsman has begun legal action against a mortgage broker after ruling that the broker had a conflict of interest in a property deal. The action is aimed at enforcing the Ombudsman's award of €16,500 in damages against the broker. The Ombudsman has also referred the matter to the Financial Regulator.
This emerged as Ombudsman Joe Meade outlined the results of a number of cases he dealt with between July and December last year, including a €40,000 compensation award against a stockbroker and a €140,000 settlement which followed an error by an insurance broker. The Ombudsman received 3,800 complaints last year, up 14% on 2005.
The case involving the broker came after a complaint from a couple who bought an investment property in England which was located by the broker. They found it difficult to rent and could not find a buyer when they tried to sell the apartment on.
The Ombudsman did not uphold their complaint that the broker had recommended an unsuitable investment, but later found that the mortgage broker privately owned the apartment in question and did not disclose this fact to the couple. The Ombudsman found that the deal was 'at all times tainted' by the conflict of interest.
In another case, a firm of stockbrokers was given €320,000 by a couple to invest in shares, but the portfolio lost more than €90,000. The couple claimed that the stockbrokers invested too high a proportion in high-risk shares, but the company said most of the losses were caused by the sale of Irish shares at a certain point on the instructions of the couple.
The Ombudsman found that, while the stockbroker could not be held responsible for most of the losses, the high proportion invested in high-risk shares went far beyond what had been agreed. He found that this amounted to negligence and awarded €40,000 in compensation.
The Ombudsman also made an award of €38,000 against a bank which sold an 82-year-old woman an 'extremely sophisticated' investment product involving derivatives. After the woman died, a complaint was brought by the executrix of her estate, who discovered that the bond she had bought would not mature for five years. The Ombudsman found no evidence that the possible delay had ever been mentioned, nor had the difference between equities and derivatives been explained. This case was also referred to the Financial Regulator.
In the insurance sector, an insurance company increased its ex gratia offer of €50,000 to €140,000, despite the Ombudsman's ruling that it had not been responsible for an error by an independent intermediary which had led to a dispute about whether a man was covered for death benefit.
Meanwhile, €90,000 was awarded in compensation after an insurance company refused to pay a claim under an accident policy on the grounds that an injury had resulted from an illegal act. The Ombudsman noted that the person involved had not or could not be charged or convicted of an offence in relation to the incident, and only the courts could determine this.
