IG Group to Face UK Ombudsman over Black Thursday Losses
Multiple clients have turned to the British Financial Ombudsman Service to challenge the firm's trading practices during January's CHF crisis.
IG Group (LON:IGG) will soon have to answer to the United Kingdom’s Financial Ombudsman for decisions it took during the SNB crisis that shocked the industry in January. In an interview with Reuters, the group’s interim chief executive, Peter Hetherington, revealed today that approximately fifteen clients have filed complaints against the brokerage with the British arbitration service.
The traders have accused IG of breaching UK regulations by acting out of self-interest rather than in favor of its clients in the immediate aftermath after the Swiss National Bank dropped the EUR/CHF floor. The group denies having done anything illegal and stands by its business practices.
Perhaps the most controversial Black Thursday step taken by IG at the time was to not forgive its clients’ negative balances. The group decided to pursue clients with demands to pay their debts and Hetherington has confirmed that less than eighty clients (out of 341) with outstanding disputes now remain. Despite the relatively small number of debtors, the group says it is still owed £15 million, implying that these are big players such as introducing brokers or hedge funds rather than simple retail traders.
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Hetherington sounds confident that the UK Ombudsman will rule on the side of his group rather than that of its clients. He expects the adjudicator to give an opinion on the first case by Christmas and that most of the cases will be resolved by June 2016.
Future Locations
Hetherington was speaking in Dubai where IG officially launched its regional office today. He suggested that there is little room left for his firm’s further expansion, “For a while, IG has been about opening in new places and I think that road is nearly run.” He added however, that the group might approach the markets of Brazil or China if their legal environment changes.
Additionally, in case of the UK choosing to leave the European Union, the firm will explore other locations for its headquarters. Hetherington said, “Clearly if Britain were to leave, it wouldn’t be that taxing to get one of our other branches turned into a proper home. And the obvious ones would be Germany or France. But you have to ask what would the attitude of the remaining EU be to products like ours if the UK were to leave.”
What lies. Most of these guys are not big players….but as it stands just huge losers. How can IG justify offloading it’s exposure prior to clients and then making clients pay unmanageable negative balances? Of the 80 odd clients left, some are scattered around various European countries. It is amazing how the FCA have made absolutely no noise in the matter whilst the FSA in Denmark have already investigated Saxo Bank. Is the British financial regulator that much of a pushover? Will they act? If not then it seems pointless for clients to look for FCA regulated firms. It seems… Read more »
Denmark slapped Saxo on the wrist for what they did (requoted clients bucketshop-style so that even those who has gains were in the negative as well).
Just to be clear, “big players” is just me doing the math (over £187500 debt per person). I don’t envy an average retail trader that will be left with a bill like that.
From the pure business perspective also, I don’t think a story about an average guy losing such an amount will be good for the broker in any way. That’s why I assumed the majority of the debt is of other companies.
Avi….what you assumed makes absolute sense. However it is pretty clear from the press stories and forum posts that the average guy has been hit. The teacher who had over €250k IG negative balance, the German engineering apprentice, etc etc. The whole incident does not shine any positive light on IG Group nor the FCA. The Japanese regulator protects it’s public, the SEC or NFA protects Americans….why are UK public such easy pickings and why is it still the case is the key question. What IG have done is just remove the smaller losses out of the way in order… Read more »
all the media reports say that it is retail clients, many of them have lost hundreds of thousands of pounds. IG says those that can pay, should pay… ie, we won’t make you bankrupt but we will sack your life savings and take all your assets up to that point. amazingly IG says over and over again their platform behaved as it should have under the circumstances and they bear no fault. as in – there is not a single thing we would have done differently, and if the scenario were to repeat itself we would expect the same thing… Read more »
I find this whole EUR/CHF situation extremely interesting from a regulatory perspective. It seems to me that a significant flaw has been exposed in both the business model pursued by spread betting firms like IG Index – and the regulatory environment in which they operate. Effectively, retail consumers have been sold a product which is capable of getting them into hundreds of thousands of pounds worth of debt within minutes, from a potential position of only hundreds of pounds of investment capital. If a financial organisation proposed the introduction of this sort of product into the retail market, the FCA… Read more »
Well said Mark.
IG Group reacted weeks later by hiking their margin requirements by over 5 times what it originally was.
In addition it is common knowledge that IG did not offer guaranteed stops in this instrument knowing full well the downside risk. However they deemed it ok to let clients continue to pile on positions and not having any contingencies in place for a black Swan type event.
What is actually quite sickening is they believe it to be ok to offload their exposure nearly 20 minutes before other clients.
ETX Capital behaved in exactly the same way as IG except the requote from 1.10 where everybody got stopped out was at 1.06. Something though has been bugging me throughout all this debacle. Barclays lost over £1billion providing liquidity down to 1.16 before pulling the plug. Many orders and stops were filled but not all. Currenex also say that many brokers clustered orders for many clients which I think is the norm. But in an event such as this it’s a failing on behalf of the clients. We have yet to see ANY brokerage dealings come to light over this… Read more »
seems to me someone at FCA should be asking themselves some hard questions. they smack down hard on payday lenders and any type of mis-selling by banks. but none of that comes close to seeing retail clients drop hundreds of thousands of pounds in a matter of minutes. even considering the type of tail risk event it undoubtedly was, there really cannot be any way FCA can think these platforms are appropriate for retail clients, or that they live up to their bold statements and aggressive marketing. fact is, IG (and some others) were simply not cut out for these… Read more »
I am with IG on this one.
Can you expand on that? Or was it just a 50-50 decision to side with IG? 😉
I flipped a coin.
I may be wrong, but it does not matter what I think. It is up to the court to decide on that.
I guess the court chose rightly.