Spreadbetting and Fiduciary Duties

[MaxTrey]

Why can spreadbetting firms exclude providing clients fiduciary duties? Surely the client is completely at the mercy of the spreadbet firm in times of volatility. The spreadbet firm can take too long to close a client position and as a result cause excess losses for the client. The client is locked in and has no option of trading his position elsewhere.

[des8]

Re: Spreadbetting and Fiduciary Duties

HI and welcome.
Just before I retire tonight I thought I would ask if your question is prompted by an actual situation, or is just a thirst for knowledge.

Basically parties can contract out of fiduciary relationships in letters of engagement. It is a way of managing potential conflicts of interest.
If you don't like the contract, don't sign it!

[MaxTrey]

Re: Spreadbetting and Fiduciary Duties

Hi...its about a real situation and in this case the t&c that was signed in the past said no fiduciary duty owed. Can get more details tmrw but need to sleep as I have a 5.30AM wake up alarm

[MaxTrey]

Re: Spreadbetting and Fiduciary Duties

So, a little background info regarding my question above.

I had a bet on EURCHF rising with a spreadbetting firm. For every Ł1 I bet, the firm have me 100x exposure.

I bet was directly with the firm who are acting as principal only.

On jan15th 2015, EURCHF collapsed. My account deposit went into negative territory within the 1st minute after 09:30am on the day.

After 10am, the firm had closed my position with a huge negative balance - enough to make me bankrupt and lose my home.

I argue that they should honour prices shown on their trading platform - they say they won't as there was no underlying liquidity.
The only proof of lack of liquidity they will provide is whatever their traders tell them.

I haven't seen any statutory demand or solicitor letters yet....but when I do where can I turn to? It's not a credit card or a fixed sum loan so CCA does not apply. In fact, I cannot find anything which explains under what legislation/statute/act spread betting negative balances come under.

Can anyone advise on what I need to be doing. This is the end of me and my family

[wales01man]

Re: Spreadbetting and Fiduciary Duties

Suggest you consult a Solicitor as your home and everything is at stake

[des8]

Re: Spreadbetting and Fiduciary Duties

Was the firm involved uk based?
If so it is regulated by FCA, and must have in place a procedure for resolving complaints.
So first complain to the firm (which you have done?)
If you are dissatisfied with their response or do not hear from them within 8 weeks you can complain to the FOS, who may be of help.
See here: http://www.financial-ombudsman.org.u...ad-betting.htm
There is a lot of advice, so I would strongly suggest you read .

I'm sorry to hear of your position, but it is not the end of you, your family or the world.
The worst that can happen is bankruptcy, and that is not the end of life by a long way.
I'm sure that some of the posters here have been through that trauma, and have survived stronger for it, with greater empathy for others having severe financial difficulties.
Do not despair, remain strong if only for your family.

[Mr $quandaŁot]

Re: Spreadbetting and Fiduciary Duties

What kind of money are we talking about here? A six figure sum?

Spread betting positions are normally automatically closed rather quickly if/when the account has no funds. The fact that it took them 30 minutes to close your position could be used as an argument.

May I please ask if you had a stop loss? Spread betting and CFDs are very dangerous. It's a one way road. I know a few people who have tried spread betting but I don't know anyone who has actually ended up in profit. Occasionally, some positions could be closed with small profits, but they are far too often offset by far greater losses.

By the sound of it, bankruptcy might be your only option as I honestly can't see any other way out of this mess

[des8]

Re: Spreadbetting and Fiduciary Duties

I hadn't bothered to ask about the existence of stop losses, guarantee stops, trailing stops or order limits.
Having already crashed, it was too late to talk about protection UNLESS he had been inappropriately advised by the firm. This is a position the FoS discuss in their article and hence my referring the OP to it.
The OP needs to do everything possible to stop or slow down the inevitable process and as there is a possibility that the firm's failure to limit the losses was inappropriate the FOS may examine if the complaint is well founded and take appropriate action to reverse the trade if it so decides.

[Mr $quandaŁot]

Re: Spreadbetting and Fiduciary Duties

I agree with Des that 'the firm's failure to limit the losses' would probably be the best defence. It is also in their own interest to do so. After all, if a punter ends up owing a substantial sum of money that they are unlikely ever to be able to pay back, what would they do? Go bankrupt of course. The firm would end up getting next to nothing so what's the point?

Ethics of some spread betting firms and CFD provides could be questioned. Galvan spent six months and literally telephone calls lasting up to an hour trying to persuade me to try CFDs with them. I finally told them where to go.

I've had three spread betting accounts in the past but closed all of them. Thankfully I decided to pull the plug before losing that much.

IG Index was ok to start with as you could bet with 10p a point. However, within months they increased minimum to Ł2 on FTSE and Ł3 on gold.

What makes spread betting so hard is the spread itself (difference between buy/sell price) and interest charges of using leverage. I read somewhere that the market would annually have to move in your favour by 8% just to cover your expences!

"Warren Buffet manages about 15% but that's why we've all heard about him."

[MaxTrey]

Re: Spreadbetting and Fiduciary Duties

Thanks for the advice thus far. I had no stop loss but account was immediately way in the red at 09.30:45am. They let my position run over 30mins and closed after 10am.

The firms response was that the market was volatile and there was a lack of liquidity. They won't provide any proof of this other than what their traders told them. Almost all other firms either closed people quickly or wiped negative accounts to zero.

What I'm worried about is that FOS can only make them compensate Ł150k....that still leaves me in the red if I win with FOS. In addition from what I read about FOS, all they will do is check if the firm acted in line with its terms and conditions - 15 odd pages and some extras.

I just can't find a consumer protection group that can help me highlight this to the FCA to take action. FCA will not respond and as far as I know it's not important to them as PPI and Fx rigging. In effect this was FX rigging. .....spreadbet firm says it's liquidity providers turned off their systems. These liquidity providers are the global investment banks. Nothing changes does it?

[des8]

Re: Spreadbetting and Fiduciary Duties

As you know FCA do not investigate individual complaints.
If you obtain the support of FOS, and obtain compensation, you would be able to use their findings in defending any claim brought against you.
This seems to me your best, if only way forward.
You can't afford to sit back and wait events, at least start with a complaint to FOS as soon as possible.

[MaxTrey]

Re: Spreadbetting and Fiduciary Duties

That makes absolute sense. I'm looking to file with FOS asap. I've gathered as much info as I can.....don't know what more I can do.

If the firm come after me, is the onus on me to prove I don't owe that amount or do they have to prove that I do based on hard facts on what happened that day - as opposed to their traders saying so?

[des8]

Re: Spreadbetting and Fiduciary Duties

Win at FOS before worrying about next step, as that will put you in a strong position if chased for the balance.

[MaxTrey]

Re: Spreadbetting and Fiduciary Duties

Thanks des8 - Will aim for that.

Does anyone know of any guides out there to maximising chances of winning at FOS. All I can find are horror stories and the fact that FOS just box-ticks and as a result side with the firm due to adhering to the firms T&Cs.

[Mr $quandaŁot]

Re: Spreadbetting and Fiduciary Duties

Thanks for the advice thus far. I had no stop loss but account was immediately way in the red at 09.30:45am. They let my position run over 30mins and closed after 10am.

The firms response was that the market was volatile and there was a lack of liquidity. They won't provide any proof of this other than what their traders told them. Almost all other firms either closed people quickly or wiped negative accounts to zero.

What I'm worried about is that FOS can only make them compensate Ł150k....that still leaves me in the red if I win with FOS. In addition from what I read about FOS, all they will do is check if the firm acted in line with its terms and conditions - 15 odd pages and some extras.

I just can't find a consumer protection group that can help me highlight this to the FCA to take action. FCA will not respond and as far as I know it's not important to them as PPI and Fx rigging. In effect this was FX rigging. .....spreadbet firm says it's liquidity providers turned off their systems. These liquidity providers are the global investment banks. Nothing changes does it?

From my own experience, FOS is waste of space.

May I ask you why you didn't have a stop loss? You were clearly playing with fire and got burnt and may lose your house now.

Unfortunately many spread betting terms and conditions simply state that the firm 'will endeavour to close the position... but cannot guarantee...'. This, from my personal experience, is enough for FOS to reject your claim.

Interestingly, I took a look at the EUR/CHF 12 month chart and could clearly see tge crash! Oops.