Customer Complaint Dated November 30th 2016

The Financial Commission / Case Examples / Customer Complaint Dated November 30th 2016
เมษายน 11, 2018

Complaint Matter

Ms. XXX has lodged his complaint with Financial Commission on the following grounds:

The Client used trading account #XXXXX for trading operations on the Forex and CFD market. Having had little to no experience trading the markets, the Client used the services of an investment consultant (a representative of the broker XXXX).

At the time of the alleged incident described in the complaint the Client held open positions LONG and SHORT (including hedged positions) in several financial instruments:

-sum of SHORT position size on Aluminium equal to 1.40 contracts,

-sum of LONG position size on Aluminium equal to 1.40 contracts,

-NET position size on Aluminium equal to 0.00 contracts;

– sum of SHORT position size on  Palladium equal to 0.50 contracts,

– sum of LONG position size on Palladium equal to 1.00 contracts,

– NET position size on Palladium equal to 0.50 contracts;

– sum of SHORT position size on Platinum equal to 0.50 contracts,

– sum of LONG position size on Platinum equal to 0.50 contracts,

– NET position size on Platinum equal to 0.00 contracts;

– sum of SHORT position size on Crude Oil equal to 0.50 contracts,

– sum of LONG position size on Crude Oil equal to 0.50 contracts,

– NET position size on Crude Oil equal to 0.00 contracts;

– sum of SHORT position size on USDRUB equal to 340000 of base currency,

– sum of LONG position size on USDRUB equal to 50000 of base currency,

– NET position size on USDRUB equal to 290000 of base currency;

– sum of LONG position size on Gold equal to 0.10 contracts;

-sum of SHORT position size on USDJPY equal to 20000 of base currency.

The incident occured on the Client’s account on November 30th, 2017 at 16:20 (trading server time). At this time a new SHORT position was established in the account on the USDRUB currency pair:

 

Ticket Open time Type Volume Item Price S/L T/P Close time Price Swap Profit
1483737 30.11.2016 16:20 sell 3.00 usdrub 63.4520 0.00 0.00 30.11.2016 16:20 65.4491 0.00 -9 154.14

 

The opening of the order #1483737 led to the decrease in margin on the account to a critical level and, as a result led to the liquidation of all open positions on the account by the Broker (Stop Out).

The Client states that she believes her trading account deposit was lost due to the deliberate actions of the investment consultant. In supporting this conclusion the Client argues that the investment consultant: opened too many trades, did not employ simple rules of equity management, placed trades in products with high spreads, frequent use of hedging in trading. The Client is requesting the Broker to return funds in the amount of $16343 that were deposit in the trading account. The documentary evidence provided by the Client includes a trading account statement for account #XXXXXX, as well as audio recordings of conversations with a representative of Broker YYYYY.

The Broker believes the Client’s complaint is not justified and does not take any responsibility for the losses incurred on the Clients’ account, because, as stated by the Broker, the Client was made aware of all risks involved in trading leveraged products on the financial market. The appropriate risk disclosures were provided to the Client in electronic format during the account opening process.

Moreover, the Broker indicated that all trades conducted on the Client’s account were made either directly by the Client or by the investment consultant after receiving verbal confirmation from the Client.

Following the Dispute Resolution Committee’s decision in the case, the Broker did not satisfy the DRC’s decision to compensate the client within 28 days, according to the Rules and Guidelines of the Financial Commission.

Because the Broker failed to satisfy the decision, the Commission took emergency action to assist the Client and invoked the use of the Compensation Fund to compensate the Client for their losses identified in the DRC decision. As a result, the Client was awarded the maximum amount of $5000 from the Compensation Fund, as the Broker was a Category B member.

Furthermore, the Commission took action and expelled the Broker’s membership with the Financial Commission.

Complainant Broker
XXX YYY
Financial Commission Complaint #ZZZ
Complaint Raising Date Complaint Filing Date
30/11/2016 11/01/2017
Complaint response:

The decision for this complaint is based on the information provided by the Client and the Broker.

To ensure an objective investigation of the incident, the Dispute Resolution Committee (DRC) of the Financial Commission closely examined the documentary evidence provided by the parties to the dispute. Having analyzed the materials of the complaint, the Dispute Resolution Committee has come to the following conclusions:

  1. With regards to the financial losses incurred by the Client due to the trading conducted by the investment consultant it is necessary to note that the Client should have been aware of all the risk associated with using or not using any trading strategy provided by the investment consultant:
  • According to section 7 of the Customer Agreement

7.1 The Company does not consult the Client on the benefits of any specific trade order or otherwise provide any other consulting regarding investments, and the Client agrees that the services do not include investment consultations on financial instruments, base markets or equity. The Client makes trading decisions exclusively of their own accord, including to place trading orders.

7.2 The Company is not required to provide any legal, tax or other advise associated with any trades. If the Client wishes, they can consult with an independent party on such matters before executing a trade.

  • The Client completed a Client questionnaire and in doing so should have evaluated their risk tolerance and also provided an acknowledgement that they accept the Terms of service with the Company that states that “the Client shall decide how to manage their account, place orders and make decisions of their own fruition.”
  • The Company takes adequate steps to provide risk warnings to customers that can result in trading non-exchange traded products, including risk warnings displayed on the Company website and electronic messages addresses to clients:

Risk Warning: Trading leveraged products such as CFD’s involves substantial risk of loss and may not be suitable for all investors. Trading such products is risky and you may lose all of your invested capital. Please click here to read full Risk Disclosure. Safekeeping and Brokerage services are provided by XXXX. with license number YYYY, address in ZZZZ. XXXX does not establish accounts to residents or passport holders of certain jurisdictions including Canada and USA.

  1. It is also important to point out that the Client is not disputing the any verbal instructions that she gave to the investment consultant for conducting trades on her account. This is confirmed by audio recordings provided by the client.

 

  1. Nonetheless, there is one instance which points to the responsibility of the Broker for partial losses incurred on the Client’s account. In particular, the Broker could not provide the Dispute Resolution Committee comments on trade #XXXXXX, which, according to the account statements provided by the Broker was closed at an off market rate (i.e. without the spread amount of 2 RUB). This fact puts into question the validity of trade  #XXXXXX and all other subsequent trades in the account (including trade #ZZZZZ), which led to the liquidation of positions on the account and subsequent losses.

 

  1. In response to its questions the DRC did not receive in a timely matter other evidence requested from the Broker, including trading server logs indicating tick pricing on the USDRUB currency pair at the time of the incident.

As such, having reviewed all the facts and circumstances of the dispute, the DRC has come to unanimous agreement that trades #XXXXX and ZZZZZZ) conducted on trading account #XXXXX should be deemed invalid and the results of these trades annulled. Given this determination, the Broker must compensate the Client for losses incurred with trades #XXXXX and #ZZZZZZ in the sum of $9233.90.

This complaint was reviewed by the members of the Dispute Resolution Committee of the Financial Commission and was processed by the Head of the Committee.
Ruled in Favor Compensation
Client $9233.90
If you have any questions regarding this investigation, please send them to the following address [email protected]
Acknowledgement
I certify that all information was considered by the Dispute Resolution Committee of the Financial Commission and hereby confirm that the decision was made fairly, impartially and without interference. I am confident that the information provided in the document is true.
Signature Designation Date
 Anatoly Bulanov

Head of DRC

 March 6th 2017

 

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