Complaints against stockbrokers greatly outnumber those against derivatives brokers
The UK Financial Ombudsman Service has registered a massive decline in complaints against spread betting brokers. The institution is tasked with receiving and reviewing consumer complaints against firms that are participating in the UK financial industry.
With the retail brokerage industry under increasing scrutiny, the decline in the number of complaints against CFD brokers shows that the recent regulatory action on the part of ESMA might be misplaced. Last year, the FCA reported that complaints against FX, CFDs, and spread betting netted 0.1 percent of total complaints.
Commenting on the news, a spokesperson for one of the latest brokerages in the industry, IG Group stated: “We value the important work carried out by the Financial Ombudsman Service. While even one complaint is one too many, we are encouraged by the Annual Review’s findings that show an 11% fall in complaints relating to spread bets and CFDs.”
“We believe that these low levels of complaints are indicative of the UK having a robustly regulated sector with responsible firms taking active steps towards improving client service, protection, and outcomes,” the UK broker’s spokesperson elaborated.
Complaints vs. Stock Brokers Much Higher than FX and CFDs
During the period of the 2017/2018 annual report by the UK Financial Ombudsman Service, the total number of complaints against the financial industry increased by about 50,000 to 1,456,396. Out of those, only 0.3 percent were against derivatives brokers with the part of spread betting companies in this figure representing only a fraction (down from 0.5 percent in the 2016/2017 report).
Overall the total complaints figure was 179, which is a decline of 11 percent on an annual basis. Complaints against derivatives brokers declined 44 percent year-on-year to 402. At the same time, the number of complaints which clients filed against stockbroking companies decreased 12 percent to 873.
Complaints against stockbrokers are therefore over four times more than against spread betting companies. Moreover, only 21 percent of complaints against derivatives trading firms yielded action on the part of the UK financial supervisor, when compared to 29 percent against stockbroking firms. These figures yield a total of 84 actions against derivatives brokers. These numbers also include interest rate hedging products.
Cryptocurrency Bets Demonstrate High Risks
In its report, the UK FOS reports about a client who contacted the financial industry overseer about a dispute with his investment broker. In his complaint, he explained how he made a contract for difference spread bet on a cryptocurrency.
After a change in the market, the cryptocurrency got split into two products, and the broker created a second position in the second product too. The investor didn’t have enough margin in his account to cover the investment, which automatically put his account into default and the broker closed both positions.
The client complained to the brokerage that he hadn’t had an opportunity to spread his bet, while the firm stated that it acted fairly.
The FOS elaborates in its report: “When we talked things through with the clients, he acknowledged he’d put a bet on a high-risk product. He also recognized that, given the Volatility in the market, the broker couldn’t have predicted how the change would affect the value of its investors’ bets.”
“Having looked carefully at the client’s agreement with the broker – and the email the broker had sent – we decided the broker had acted in line with its agreement to minimize risk. And it had communicated clearly about what it was doing. So, while we were sorry George was disappointed, we didn’t tell the broker to take any action,” the FOS explains.
The UK Financial Ombudsman Service has registered a massive decline in complaints against spread betting brokers. The institution is tasked with receiving and reviewing consumer complaints against firms that are participating in the UK financial industry.
With the retail brokerage industry under increasing scrutiny, the decline in the number of complaints against CFD brokers shows that the recent regulatory action on the part of ESMA might be misplaced. Last year, the FCA reported that complaints against FX, CFDs, and spread betting netted 0.1 percent of total complaints.
Commenting on the news, a spokesperson for one of the latest brokerages in the industry, IG Group stated: “We value the important work carried out by the Financial Ombudsman Service. While even one complaint is one too many, we are encouraged by the Annual Review’s findings that show an 11% fall in complaints relating to spread bets and CFDs.”
“We believe that these low levels of complaints are indicative of the UK having a robustly regulated sector with responsible firms taking active steps towards improving client service, protection, and outcomes,” the UK broker’s spokesperson elaborated.
Complaints vs. Stock Brokers Much Higher than FX and CFDs
During the period of the 2017/2018 annual report by the UK Financial Ombudsman Service, the total number of complaints against the financial industry increased by about 50,000 to 1,456,396. Out of those, only 0.3 percent were against derivatives brokers with the part of spread betting companies in this figure representing only a fraction (down from 0.5 percent in the 2016/2017 report).
Overall the total complaints figure was 179, which is a decline of 11 percent on an annual basis. Complaints against derivatives brokers declined 44 percent year-on-year to 402. At the same time, the number of complaints which clients filed against stockbroking companies decreased 12 percent to 873.
Complaints against stockbrokers are therefore over four times more than against spread betting companies. Moreover, only 21 percent of complaints against derivatives trading firms yielded action on the part of the UK financial supervisor, when compared to 29 percent against stockbroking firms. These figures yield a total of 84 actions against derivatives brokers. These numbers also include interest rate hedging products.
Cryptocurrency Bets Demonstrate High Risks
In its report, the UK FOS reports about a client who contacted the financial industry overseer about a dispute with his investment broker. In his complaint, he explained how he made a contract for difference spread bet on a cryptocurrency.
After a change in the market, the cryptocurrency got split into two products, and the broker created a second position in the second product too. The investor didn’t have enough margin in his account to cover the investment, which automatically put his account into default and the broker closed both positions.
The client complained to the brokerage that he hadn’t had an opportunity to spread his bet, while the firm stated that it acted fairly.
The FOS elaborates in its report: “When we talked things through with the clients, he acknowledged he’d put a bet on a high-risk product. He also recognized that, given the Volatility in the market, the broker couldn’t have predicted how the change would affect the value of its investors’ bets.”
“Having looked carefully at the client’s agreement with the broker – and the email the broker had sent – we decided the broker had acted in line with its agreement to minimize risk. And it had communicated clearly about what it was doing. So, while we were sorry George was disappointed, we didn’t tell the broker to take any action,” the FOS explains.
Webull Introduces "Lite" Version of Trading App for Retail Users
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
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Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
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