The 11:57 switch that was recorded at 12:04
On a platform, a client holds £300,000 in an OEIC (Fund A) with a 12:00 valuation point and £8,000 in cash. At 11:57 on Monday she submits an online instruction to switch £200,000 from Fund A into an ETF that trades on-exchange and settles T+2. The platform's cut-off for Fund A is 12:00, but its order-management system queues the instruction and records it at 12:04; the switch is priced using Tuesday's 12:00 valuation. On Tuesday the ETF is bought at 14:30. Fund A's price falls 1.8% between Monday and Tuesday, so the client receives £3,600 less than she expected. Separately, Fund A's manager later announces a temporary suspension of dealing because of a valuation uncertainty. The platform had already bought the ETF on Tuesday using its own settlement facility because the Fund A proceeds had not arrived; the ETF settles on Wednesday, but the Fund A cash arrives the following Monday. The client complains and asks the platform to 'undo' the ETF purchase and pay the difference.
1. Should the switch have been priced at Monday's or Tuesday's valuation, and what evidence matters?
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The starting point is the platform's disclosed cut-off: instructions received before 12:00 are normally priced at that day's valuation point. The client submitted at 11:57, so the instruction should have been treated as received on Monday unless the platform can show that receipt occurred after the cut-off. The client's submission timestamp, the platform's server logs, the order-management queue audit trail and the confirmation record should all be reviewed. If the delay was caused by the platform's own system, the firm should put the client in the position she would have been in - broadly, applying Monday's price and paying the £3,600 difference, plus any consequential loss that is fair to redress. If the instruction genuinely arrived after 12:00, Tuesday pricing is correct. Market movement alone is not compensatable; the error is the missed pricing point, not the fall in value.
2. What are the issues with buying the ETF before the Fund A proceeds arrived?
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A switch involves two legs with different settlement cycles: the ETF settles T+2, while the OEIC sale proceeds may take longer. The platform must manage the resulting cash timing gap. Using its own money to settle the ETF is acceptable in principle if the firm has adequate resources and the arrangement is documented; using other clients' cash would be a client money breach. The platform should not force-sell the ETF without instruction simply to cover a temporary shortfall, and it should not treat the client's £8,000 cash as automatically available unless the terms permit set-off. It should monitor the failed or delayed receipt, chase the Fund A manager, record the settlement risk and ensure the client is not charged overdraft or late-settlement costs caused by the platform's own timing. The client's complaint about 'undoing' the ETF purchase should be assessed on whether the platform executed the switch correctly, not on later market movements.
3. How should the platform handle the fund suspension and the complaint?
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The suspension affects the Fund A leg, not the already-executed ETF purchase. The platform should explain that the ETF trade cannot be cancelled simply because the client has changed her mind or because the fund suspended. It should confirm whether the Fund A sale was priced before the suspension and whether any proceeds are now delayed. If the platform had executed the switch incorrectly, it should correct the error; if the suspension is a market event outside its control, it should not provide investment redress. The complaint should be acknowledged promptly, investigated with the audit trail and settlement records, and answered under the complaints rules. The platform should also consider whether the client needs temporary liquidity and whether any forbearance is appropriate, while avoiding personal advice. Root-cause analysis should cover the order timestamping and the settlement gap.