Posted by Zoë Jensen on 18 December 2020
Tagged to FOS, Judgement, Market Abuse, Trading

At the end of last month, the High Court handed down judgment in TF Global Markets (UK) Ltd (t/a Thinkmarkets), R (On the Application Of) v Tan & Ors  [2020] EWHC 3178 (Admin), in which it held that the Financial Ombudsman Service (FOS) had applied the wrong test when deciding that an online brokerage company had not been entitled to close the accounts of certain clients for suspected market misconduct. On an objective reading of the terms of trading, the court held that the company had a contractual discretion to close the accounts in question. The FOS decision was quashed and the complaints have been remitted to the FOS for determination on whether the firm exercised its contractual discretion reasonably. 

Unilateral account closure decisions can often trigger complaints which escalate into disputes, even when the firm has followed all the necessary policies and procedures.  This case focuses on the interpretation of contractual terms designed to provide the firm with the discretion to close accounts when it suspects wrongdoing.  Firms are often disinclined to challenge a decision of the FOS through judicial review. It may be a comfort to see that it was a challenge worth making in this case.  


TF Global Markets (UK) Ltd (TF Global) operated an online platform for dealing in investments, including forex trading and derivatives.  Each of the complainants had been engaged in forex trading on the platform. TF Global suspected that the complainants had taken advantage of price latency or had been engaged in market manipulation because: their accounts exhibited evidence of arbitrage trading; and, in some instances, collusion to take advantage of price latency.  Relying on its contractual terms of trading, TF Global purported to close the accounts and also withheld sums, on the basis of the above suspicions.  

The complainants complained to the FOS, who determined that: (i) the relevant terms only permitted TF Global to act as it had if the market manipulation had actually taken place; and (ii) that it was for the FOS to determine, on the balance of probabilities whether it had in fact taken place. The FOS determined it was “no more than a possibility” that the complainants had conducted abusive trading.

TF Global challenged the FOS determination via judicial review; seeking an order quashing the final decisions.

Points of interest from the judgment

  1. The task before the court, in a case such as this, is to determine the objective meaning of the language used in the contractual terms of trading.
  2. It was clear from the reading of the contract as a whole (the FOS had focused very much on one clause) and the regular use of discretionary words throughout the contract, such as: "which we judge", "in our absolute discretion" or "acting in our reasonable sole discretion"; that this contract was drafted to give TF Global contractual discretion to close the accounts. It was, therefore, for TF Global to determine whether there had been a trade which it judged to be indicative of misconduct.
  3. Such contractual discretion is subject to a duty not to exercise that discretion arbitrarily, capriciously or unreasonably (often referred to as the “Braganza duty”, after the 2015 Supreme Court case of the same name).
  4. It was not for the court, in this case, to determine whether that discretion had been reasonably exercised.

Practical implications

The FOS decisions have been quashed and the matter will now be remitted to the FOS, who will need to consider whether that discretion was exercised reasonably as against each complainant.  in making this determination the court highlighted that the FOS will need to give detailed consideration to the evidence available to TF Global at the time of making the decision to close the accounts and withhold the profits of each individual.

This provides a further reminder of the importance of recording, in writing, the rationale behind account closure decisions.

The authors

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