Explaining the Conflux of Lawsuits vs FXCM #Askfinmag

This week our social media followers at #Askfinmag sought clarity on the recent legal situation surrounding FXCM shareholders.

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I personally do not portend any effect whatsoever. Credit as you know is built upon some level of mutual trust, between both the lender and the borrower – albeit in its simplest form. I do not personally feel that blockchain is at a developed or trusting enough state to serve as a complement to credit, rather merely a substitute in certain countries where such channels for borrowing are very underdeveloped.

To my knowledge only brokers organize trading championships, which is often a very popular marketing tactic since it fosters engagement and attracts a lot of attention from leading traders. Sebastian Kunhert, the founder of tradimo, wrote a very informative piece on the subject earlier this week. As for ways of rating traders worldwide, external of the actual broker, that is not something I am familiar with.

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To answer your question, we reached out and consulted with hi-tech and capital markets attorney Tal Itzhak Ron from Tal Ron, Drihem and Co. Law Firm for his perspective.

Filing a class action on financial matters has become a worldwide tournament. There is an increasing new wave of law firms, some based in Europe, with a majority based in certain US states, aiming to find “loopholes” in portfolios and public statements, then to file class actions based on this lack of information.

Advocate, Notary and Chairman of Tal Ron, Drihem & Co., Tal Itzhak Ron
Advocate, Notary and Chairman of Tal Ron, Drihem & Co., Tal Itzhak Ron

This trend shall not stop and the FXCM case may be the test case. If in the past, class actions have been targeting consumer-oriented companies reducing their packaging size, or have been focused on the interpretation of information posted by medical companies, the recent trends are large-scale class actions against public financial companies and large regulated private companies regarding investors’ rights. Some of the investors filing the law suits are “sophisticated investors” (e.g. investment funds) and some – individual shareholders, American and non-American.

The ease of filing such lawsuits, and the fact that many of those lawsuits are focusing on investments in penny stocks, non-disclosure in portfolios, and financial damage allegedly made to shareholders, makes this trend grow bigger.

In order to defend themselves properly, brokers should prove, in a significant level of certainty, that it properly notified its investors on such risks to the company’s funds. Some of those lawsuits shall end in settlements, depending on the forums where those law suits shall be litigated.

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