The Financial Ombudsman Service has ordered Armstrong Watson Financial Planning Limited to pay compensation to the estate of a customer it said was “mis-sold” an enterprise investment scheme.

Ombudsman Sarah Tozzi said the customer, Mrs B, was not given suitable advice when investing £200,000, and then a further £40,000, into the Octopus Eureka EIS.

Mrs B was advised by Armstrong Watson in 2010 to invest in the scheme, with the firm recommending the second investment a year later.

When Mrs B passed away in 2016, the estate was only able to withdraw £38,000 as the remainder of the investment was illiquid, though some additional payments were since made from the investment while the complaint was with the Fos.

The Fos’s investigator said Mrs B had the capacity to withstand capital losses, having a further £270,000 in cash, £100,000 in NS&I bonds and £630,000 in other investments, and that the OEIS did provide income tax relief and inheritance tax relief, which was in line with Mrs B’s objectives.

However, the Fos said it was not persuaded that the investment was in line with the investor’s attitude to risk.

The ombudsman said it was not satisfied that the high-risk nature of the investment had been explained to Mrs B, and there was nothing in a suitability report that said she would lose all her capital if the investment failed, rather it said that the investment would lead to an £80,000 saving on inheritance tax.

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