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The financier and property mogul Robert Tchenguiz has argued that he should be deemed a retail rather than professional investor in a legal battle with IG Index over a £6.5mn trading loss.
The trading platform is suing Tchenguiz in London’s High Court, demanding the entrepreneur and investor cover losses that he racked up on positions in FirstGroup during an activist campaign he supported against the transport company.
IG is seeking £6.5mn plus interest — as of January, worth an additional £1.36mn — from the tycoon.
His lawyers told the court on Tuesday that he could not be held liable for the losses, on the basis that he was a retail client of IG and so enjoyed “critical” protections afforded to everyday investors.
On the opening day of proceedings, his barrister Zoë Barton KC said Tchenguiz had been “wrongly classified” as an “elective professional client” due to IG’s “wholly deficient” account opening process.
Tchenguiz’s status as an everyday investor limited his liability to funds available in his account, Barton maintained, rather than putting him on the hook for any further losses as would have been the case if he were considered a professional.
Tchenguiz earned a reputation as a prolific dealmaker — particularly in the property sector, with a focus on pubs and supermarkets.
The younger brother of Vincent Tchenguiz, he became known as one of the UK’s most formidable activist investors, intervening in supermarket J Sainsbury among other companies.
His profile faded following the financial crisis, although he returned to the activist fray in 2019, supporting a campaign for change FirstGroup waged by the US fund Coast Capital.
Tchenguiz accumulated a position in the UK train and bus company through accounts with trading providers including IG, with which he opened an account in 2019.
But the positions turned against him and by March 2020 the “liquidation level” of his account was breached, according to IG.
In written legal arguments, IG’s barrister David Mayall described Tchenguiz as “a very sophisticated and experienced” investor who had “read and understood” various IG terms and conditions.
Tchenguiz had been warned about the loss of an important protection afforded to retail investors “on numerous occasions”, Mayall said. “It is difficult to see how the warnings could have been clearer.”
Tchenguiz lost a similar case against the spread-betting company CMC in 2022. The judge in that case found that Tchenguiz had been “lawfully categorised as a professional client and CMC did not fail to comply with the duty to give appropriate warnings”.
In the current proceedings, Barton said that IG’s account opening process had been “wholly deficient, in that it failed to comply with the applicable legislation”.
IG had failed to meet the requirements set out by the financial regulator, the Financial Conduct Authority, in its “conduct of business” rules, Barton said. She added IG was required to follow a “prescribed procedure” to ensure Tchenguiz satisfied qualitative and quantitative criteria to establish he was a professional investor.
“By reason of these failures, Mr Tchenguiz remained at all times a retail client,” she said. As a result “he continued to benefit from the protections originally conferred on him as a retail customer”.
The case continues.
