Plus500UK Ltd · DRN-5820921

The complaint Miss S complains that Plus500UK Ltd let her open a CFD trading account when it wasn’t appropriate for her. She says she didn’t understand the products she was trading and lost more than she could afford to. What happened Miss S opened a CFD trading account in 2019. She traded until 2025, making an overall loss of around £38,000. She complained to Plus500 that she should never have been allowed to open the account, as at the time she had little to no experience with trading leveraged products like CFDs and didn’t have the financial resilience to bear the losses she was then exposed to. Miss S said that over the years of holding the account she’d contacted Plus500 on a number of occasions regarding her difficulty in understanding the products and operating the account. She said Plus500 did nothing to identify her as being unable to afford her losses and simply tried to “educate” her on how to trade. Plus500 didn’t uphold Miss S’s complaint so she came to our service. One of our investigators looked into things and initially concluded that it shouldn’t be upheld, as Plus500 had warned Miss S of the risks her trading exposed her too. After considering things again he revised his view. He said that Plus500 shouldn’t have allowed Miss S to open the account as it ought to have considered that it wasn’t in her best interests to do so. So he thought it should pay her some compensation for the losses she suffered. The investigator said Plus500 should pay Miss S back anything she lost during the first 12 months she traded with the firm. He said that from that point, Miss S would have built up enough knowledge of CFD trading to have been able to understand the risks. So he didn’t think that Plus500’s initial error in allowing her to trade could reasonably be considered the cause of her losses after that. He also thought Plus500 should pay Miss S £500 in light of the distress caused my making those losses. Plus500 accepted the investigator’s view. But Miss S didn’t, and has provided substantial responses and further evidence. While I can confirm that I’ve read and considered Miss S’s submission in its entirety, I shall summarise it briefly as follows: • She had failed Plus500’s assessment of knowledge and experience before opening the account. • She’d declared earnings and savings in bands – for example she gave her earnings as “£0 to £15,000” where this could in fact have been zero. And she said she could afford to trade between £100 and £5,000 a year. • Once she opened the account she deposited £5,000 straight away, and a further £4,000 a few days later. • When she contacted Plus500 over the years about difficulties she had operating the account. Plus500 simply tried to educate her on how to trade and never told her she could complain to the Ombudsman service. • In 2023 she was again asked to complete a questionnaire about her understanding of

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CFD trading. She worried she didn’t know the answers and had to conduct research. She felt embarrassed and said Plus500 simply said it shouldn’t be a problem as she was an experienced trader. • Plus500 threatened to close her account if she didn’t complete the questionnaire, and Miss S felt like this was theft of the savings she’d already lost by then. • She felt no option than to continue to trade to recover her losses. • Having sought legal guidance and support in bringing her complaint, her solicitor showed her some previous decisions issued by our service. She says these cases were very similar to hers, and we concluded the complainants there should be compensated with their full losses. • Plus500’s breaches of regulatory requirements weren’t limited to the point of sale but continued throughout the time she traded. • If we think Plus500 shouldn’t have opened an account for her, surely all the losses she suffered were caused by that mistake. • Plus500 had policies instructing employees to be alert for and escalate signs of customers showing vulnerability or a complete lack of understanding of CFD trading. • Miss S’s trading should also have alerted Plus500 to potential difficulties as she entered margin call nearly 200 times. • In another case Plus500 said it intervened when a customer lost more than they’d said they could afford. This didn’t happen in Miss S’s case. • Miss S had suffered with addiction and mental health issues. This meant she was less likely to be able to mitigate her losses and stop trading. • Miss S felt stuck in a cycle and didn’t know she could complain. • As a younger person, with no parental guidance or support available, Miss S was more vulnerable and less aware of her rights than others. • Miss S said a fair outcome would be for Plus500 to return all her losses, along with interest. It should also pay the legal costs Miss S has incurred in bringing her complaint. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I’d like to say first that I’ve carefully considered everything Miss S has said, and thank her for her detailed and cogent submission in response to our investigator’s opinion. It is clear that Miss S has suffered a substantial financial loss through her Plus500 account, and that this has had a significant impact on her. Beyond that, I can see from her submissions that she has been through a number of challenges and I want to be clear that I don’t disregard or diminish them in any way. I’m pleased to hear that Miss S seems to be in a better place than has been the case in the past. I’d also note that while I have read and considered everything that’s been said, I may not directly address each and every point that’s been made. I mean no discourtesy by this but it’s simply that the purpose of my decision is to set out my overall conclusions and my reasons for reaching them, rather than addressing all the individual arguments. Some of the main facts of this case are now common ground or accepted. Everyone now agrees that Plus500 shouldn’t, in 2019, have allowed Miss S to open a CFD trading account. So I shan’t dwell on the circumstances of the account opening. What remains in dispute is to a large extent the impact of that account opening. I think this has two distinct strands. One is the question of causation and what losses are fairly attributable to the initial error. And the second is the question of whether Plus500 ought anyway to have identified Miss S’s vulnerability earlier, or in any event stepped in to stop her losing as much as she did. I’ll deal

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with each in turn. Our investigator concluded that Plus500 should refund the money Miss S lost in her first 12 months trading. He said that after this point Miss S would have built up enough knowledge and experience to understand the risks she was exposing herself to. Miss S has argued that she never gained such knowledge – and has pointed to the fact she repeatedly asked Plus500 for guidance about aspects of trading and didn’t understand the products she was dealing with. I accept that but for Plus500’s error, Miss S wouldn’t have opened her account. So she wouldn’t have been in a position to suffer the losses she did. But I weigh that against the fact that opening the account didn’t, in and of itself, cause the losses Miss S suffered. It gave her the ability to trade CFDs – it gave the opportunity to either make gains or losses. Unfortunately Miss S was unsuccessful in her trading and she made losses. I’ve also thought carefully about the nature of the error Plus500 made. When opening a CFD account it was obliged to assess if the account was appropriate. To do that it needed to assess if the customer had sufficient knowledge or experience in order to understand the risks involved (COBS 10A.2.3R). Miss S didn’t have that knowledge or experience at the time, and everyone now agrees Plus500 should have exercised its discretion to turn Miss S’s business away. But if, at some point down the line, a customer gained enough knowledge and experience such that they did now understand the risks and an account would, at that point, have been appropriate, then I don’t think it would be fair for the firm to be held responsible for any further losses that were suffered. I say this because, if a customer has sufficient knowledge and experience and wants to open an account, then by and large they are able to with no other immediate considerations from the firm. The regulator doesn’t require a firm to check if trading is affordable or otherwise in a customer’s interests – if they’re sufficiently knowledgeable about the risks then the firm is allowed to offer trading facilities. So if there comes a time when the account would have been deemed appropriate, and therefore the firm wouldn’t have been required to exercise its discretion about whether to allow the account to be opened, then I don’t think it would be fair to continue to hold the firm responsible for the consequences of the trading. The question here therefore becomes whether Miss S did at some point gain that knowledge and experience. Miss S argues she didn’t, and has provided evidence in the form of conversations with Plus500 showing her lack of understanding for some elements of how the product worked. But the type of knowledge and experience required for an account to be appropriate is quite specific. And I appreciate can seem counter-intuitive to the ordinary meaning of the word “appropriate” – here it is used in its regulatory context. To be considered appropriate the client has to have “the necessary experience and knowledge in order to understand the risks involved in relation to the product or investment service” (my emphasis). By the time Miss S had her account for a year, she’d placed nearly 1000 trades in a wide variety of instruments. She’d made gains and losses, although overall she’d lost around £10,000. I find that at this point Miss S had gained enough experience of CFDs in order to

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understand the risks involved. She knew what happened when she placed trades, and how much she could lose and how quickly. While she may have still not grasped some technicalities of some of the products, I’m not persuaded that she could reasonably have been expected to fail an appropriateness assessment by that point. I say this mindful that under COBS 10.2.8G a firm “may infer knowledge from experience”. Overall I’m satisfied that fair compensation for inappropriately opening Miss S’s account would be to refund the losses Miss S made in her first year trading. Miss S has also argued that Plus500 ought to have more effectively monitored her account, or checked her financial standing (or both) and realised she was losing more than she could afford and was vulnerable. She says it should have stopped her trading and suffering further losses. Here I shan’t focus too much on whether Plus500 should have been monitoring her account more closely, or realised she was potentially vulnerable or making excessive losses. This is because even if I agreed with Miss S on all this, I’m not persuaded it would change the outcome here. I say that as I don’t think the result would have been for Plus500 to stop Miss S trading, and so I don’t think it would have been likely to reduce her losses. There are no prescriptive regulatory rules regarding vulnerable customers or offering execution only trading services to those who can’t afford it, or who may be causing themselves economic harm. But firms do need to comply with COBS 2.1.1R which says they need to have regard for their customers’ best interests and treat them fairly. This includes considering the interests of vulnerable customers or those – as Miss S has said she displayed tendencies – who may cause themselves harm by trading with a gambling compulsion. The courts have considered this question on multiple occasions and I’m satisfied their conclusions are clear. In Quinn v IG Index Ltd [2018] EWHC 2478 the judge said at paragraph 88 of his judgment: “the obligation imposed by COBS 2.1.1R to " act honestly, fairly and professionally in accordance with the best interests of its client …" does not impose on an authorised person carrying on designated investment business the duty of preventing a retail client from engaging in an execution only transaction, or execution only transactions, of a class that it has assessed is appropriate for the client concerned” And at paragraph 91, on the duty imposed on firms by COBS 2.1.1R, the judge noted that: “it is in my judgment one that is inconsistent with an intention to impose a duty on for example a spread-betting operator to prevent a bet placer from placing bets.”. Bearing in mind that as I’ve found above, after she’d been trading for a year I consider the CFD account to have been appropriate for Miss S from a regulatory perspective, and bearing in mind the case law on the matter, I don’t think it would have been fair to expect Plus500 to unilaterally stop Miss S trading. What I think it could have done (although I’m not saying it should have – I make no finding on this point) is to have reached out to Miss S. It could have checked her financial position and asked if she wanted to continue trading. But I don’t think there’s a reasonable expectation under the rules that applied at the time that Plus500 should have done more than that. I’ve then considered what, if anything, Miss S might have done had Plus500 said something

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to her about her trading – or even voiced concerns that it thought she might be vulnerable or trading excessively. Here I’ve given a lot of thought to Miss S’s recent submissions. And I’ve also considered the evidence of her correspondence with Plus500. By Miss S’s own admission she was trapped in a cycle whereby she wanted to make up the losses she’d already suffered. While this is of course understandable, particularly given aspects of her neurodiversity she’s explained, in my view it lessens the likelihood she’d have decided to stop trading. I’ve taken into account what Miss S said to Plus500 in 2023 when it asked her to complete a renewed appropriateness questionnaire. At the point where trading restrictions were in place pending the completion of the form, Miss S asked about what needed to happen for her to resume trading. She said “if there’s nothing untoward with my deposited funds, these questions will be removed?”. She goes on to say “I do not consider that my deposited funds have increased and I am sure you can see the same £1000-2000 I deposit to maintain my equity at the open time of certain instruments I take straight back out. I am not just depositing excessive amounts into my trading account and am potentially missing profit right now due to being faced with unreasonable questions which require going into the history of my account is not good.” Overall I find that had Plus500 contacted Miss S that it’s more likely than not that she would have continued trading regardless. In summary, I reach the same overall conclusions as our investigator. I think Plus500 shouldn’t have allowed Miss S to open her account. But I don’t think it would be fair and reasonable in the particular circumstances of this complaint to require it to pay her the compensation she’s asked for. Putting things right To put things right Plus500 should pay Miss S an amount equal to the net losses she suffered on the account during the first 12 months she traded. Like our investigator I think these losses will have been distressing to Miss S. She has given a detailed account of the impact this has all had on her. I again want to emphasise that I’ve given that great thought and don’t diminish her experience in any way. But I must also bear in mind that any award I make must be for the distress caused by the firm’s error – which here is the first year of losses. While Miss S went on to lose further sums, the ongoing impact of that situation is beyond what it would be fair to attribute to Plus500. I agree with our investigator that in all the circumstances £500 is fair compensation for Miss S’s distress and inconvenience. My final decision For the reasons given above I uphold this complaint and direct Plus500UK Ltd to pay Miss S compensation as set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Miss S to accept or reject my decision before 28 April 2026.

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Luke Gordon Ombudsman

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