# Dispute with Financial Services Provider



## sumit gupta (18 December 2013)

Hey Guys

I have a dispute with the FSP regarding closing off my futures positions at an unfair price and breach of contract by taking my account off the Automatic close out system and thus letting my account run into negative. Instead of closing my positions when my account entered margin call, they called me and asked if i can arrange more funds. I said that give me some time to arrange the funds. But i could not arrange any funds and they kept waiting for 4 hours or so till the time my account ran into negative.

I lodged a dispute with FOS which has now been determined in favour of FSP. Is there anyone who has been in same boat as me and dealt with this kind of situation.

Can anyone suggest what should i do now? Or does anyone know some lawyer or solicitor who can provide some legal help.

Thanks


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## skc (18 December 2013)

sumit gupta said:


> Hey Guys
> 
> I have a dispute with the FSP regarding closing off my futures positions at an unfair price and breach of contract by taking my account off the Automatic close out system and thus letting my account run into negative. Instead of closing my positions when my account entered margin call, they called me and asked if i can arrange more funds. *I said that give me some time to arrange the funds. But i could not arrange any funds and they kept waiting for 4 hours or so till the time my account ran into negative.
> *




Can't help you with solicitors etc, but this sounds like they were just following your instructions? Unless you meant that they continue to keep your position open AFTER you informed them that you could not arrange additional funds?


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## >Apocalypto< (18 December 2013)

sumit gupta said:


> Hey Guys
> 
> I have a dispute with the FSP regarding closing off my futures positions at an unfair price and breach of contract by taking my account off the Automatic close out system and thus letting my account run into negative. Instead of closing my positions when my account entered margin call, they called me and asked if i can arrange more funds. I said that give me some time to arrange the funds. But i could not arrange any funds and they kept waiting for 4 hours or so till the time my account ran into negative.
> 
> ...




Sorry to be harsh but it's your fault and they are not responsible. They called you, you could have advised to close out at a certain level or immediately but you asked them to give you some time to cover the margin.. it's not their fault you took to long. Markets can do anything anytime so this a learning experience for you. they had to cover their risk by not allowing your positions to go to deep into negative. 

Take it on the chin and move on.


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## skyQuake (18 December 2013)

sumit gupta said:


> taking my account off the Automatic close out system and thus letting my account run into negative.




Can you elaborate on this?


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## Hodgie (18 December 2013)

sumit gupta said:


> I lodged a dispute with FOS which has now been determined in favour of FSP.




The panel/Ombudsmen at FOS who determined your case should apply the same legal principals that you would find in any court system. 

The reason FOS is there is to provide an avenue for consumers to make a claim without having to pay huge amounts in legal fees.

Although the determination is not binding on the consumer. If they found in favour of the FSP in the determination stage at FOS it is unlikely that you will get a different outcome by going anywhere else. It will just cost you time and money.

If you go to seek legal advice they may tell you that you are in the right even if they dont beleive it to be true because they will get paid either way. The only winner will be the lawyers.


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## cynic (18 December 2013)

sumit gupta said:


> Hey Guys
> 
> I have a dispute with the FSP regarding closing off my futures positions at an unfair price and breach of contract by taking my account off the Automatic close out system and thus letting my account run into negative. Instead of closing my positions when my account entered margin call, they called me and asked if i can arrange more funds. I said that give me some time to arrange the funds. But i could not arrange any funds and they kept waiting for 4 hours or so till the time my account ran into negative.
> 
> ...




Unfortunately I am not in a position to offer any helpful advice, but I would be interested to know two things further before commenting on your situation.

Namely, what was it that led you to believe that you could depend upon the protection of an automatic closure procedure/system/policy (i.e. did the FSP misrepresent the reliability of this closure mechanism)

and 

what do you mean by "unfair price" (i.e. was the price substantially inferior to the underlying futures market at the time the position/s was/were closed?).


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## sumit gupta (19 December 2013)

Thanks guys for your prompt replies. I will answer all your questions below.

Prior to this day, many times when my account fell in margin call, they had closed off my positions either completely or partially to get me out of margin call. They did not call me at all and just sent an email notification prior to closing off. But on this day they called me first. I could not answer the phone call hence they left a voice message that if I could not put more funds in they will start closing off my positions.

I called them back after 44 minutes (soon after i checked the message). In the meantime, I also tried to close some positions as my account was still going down but could not as it said account on close out monitor. When I spoke to them they said they will give me 30 mins and if I cannot put more funds, they will close it but they did not do so and kept waiting for 4 hours and kept calling me for more margin and i kept asking for more time.

Finally when i agreed to sell the positions at a certain price, they closed all the positions 20 points below the traded level. Later on the charts showed that the price which they closed off my positions was not even traded on that day. Hence, i asked them to atleast reverse it back to the price being traded. They said as the underlying market was closed, 20 points below is fair but my view is that when underlying market is closed, they already charge a higher spread increased from 1 point to 6 points..

But FOS rejected both my disputes. Anything I can do now?

Thanks.


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## skc (19 December 2013)

sumit gupta said:


> I called them back after 44 minutes (soon after i checked the message). In the meantime, I also tried to close some positions as my account was still going down but could not as it said account on close out monitor. When I spoke to them they said they will give me 30 mins and if I cannot put more funds, they will close it *but they did not do so and kept waiting for 4 hours and kept calling me for more margin and i kept asking for more time.*




Why did you keep asking for more time? If you keep changing your instruction (i.e. kept asking for more tim), then again it sounds like they are just following your updated instructions? 



sumit gupta said:


> Finally when i agreed to sell the positions at a certain price, they closed all the positions 20 points below the traded level. Later on the charts showed that the price which they closed off my positions was not even traded on that day. Hence, i asked them to atleast reverse it back to the price being traded. They said as the underlying market was closed, 20 points below is fair but my view is that when underlying market is closed, they already charge a higher spread increased from 1 point to 6 points..




If sounds like you are trading CFDs rather than actual futures? If that is the case, you are not in a strong position because:

1. They make a market and you accept and trade their price. That's in the PDS and perfectly legit.
2. The prices on the charts are probably mid point between buy/sell so doesn't really reflect "traded" prices.
3. Spread can be as wide as they like when the underlying market is closed.

But if you are trading real futures it is a bit bizzare that they'd just make up a traded price.

Anyhow... it sounds like there's a lesson in there. And chasing down the FOS further doesn't sound like the right response.


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## Hodgie (19 December 2013)

If it went all the way through to the determination stage at FOS it was determined by either the financial ombudsmen or a panel. This is the last stage at FOS. There is no further you can go with them.

A decision made by FOS is legally binding on the FSP but it is not binding on you. However FOS will not re-open your case, there is nothing more FOS will do for you.

The only option is the court system, which is very expensive. I dont know how much money your trying to get back here but it would have to be a significant amount to warrant going through the courts.

Anyhow the courts would look at much the same as they did at FOS.


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## cynic (20 December 2013)

From reading your posts I can understand that you've previously placed a certain amount of faith in the conduct of your provider and that this recent event represents a change in your experience of their business practice. 
As such, you were likely caught off guard. However, when it comes to challenging the legality of sudden changes in a provider's business practices (and the failure of that provider to alert you to those changes in a timely manner), the outcome will usually depend on what is legally demonstrable. 
The documented terms and conditions ,as agreed when the account was opened (and perhaps amended from time to time), will likely become the legal fallback position of the provider in any dispute that arises. 
It is my understanding that two things would need to be demonstrated to the satisfaction of the FOS (or other body legally empowered to act in this matter), namely, you would need to demonstrate that the FSP's conduct was in breach of the client agreement and also demonstrate that any financial losses suffered were consequent to the aforementioned breach of agreement. Failing this, the best that I can suggest is to find a more suitable provider for your future trading activities. 
Based upon my experience to date, it would be nigh on impossible for an average retail trader to achieve a favourable ruling. For those whom disagree, just take a closer look at the terms and conditions that one must consent to before the provider even allows the trading of their products. (Yes! The wondrous fairy tales depicted by the glorious marketing promises and glamorous advertisements start to look more like nightmarish horror stories once one becomes acquainted with the true financial ramifications of certain clauses embedded within voluminous PDS and client agreement documents!)


I understand that you probably feel betrayed  by your FSP, and frustrated by the absence of any viable legal remedy. I can assure you that you are by no means alone in such sentiments!
Expressing your intense disgust to trusted friends and relatives might help alleviate some of your angst and restore some sense of empowerment. (This might also serve to forewarn a few people and help them avoid a similarly unsatisfactory experience!). 
Incidentally, you are to be congratulated on your forbearance in choosing not to disclose the name of the offending FSP. I envy your capacity for self restraint. I have been somewhat more blatant in my public expressions of contempt for one of the major providers! (Fortunately, I haven't attracted a defamation suit!)

Current Australian laws seem to be sufficiently liberal to legally allow a vast array of unscrupulous behaviours within the financial services industry. Consequently, I have some sympathy for the FOS. They are in the unenviable position of often having to deliberate on matters where they cannot legally rule in favour of the client despite being able to recognise ill treatment on the part of the FSP.   
ASIC, on the other hand, have much to answer for. I've often expressed my contempt for their shortcomings on this forum, particularly with respect to them allowing the inclusion of very generous clauses thereby enabling unscrupulous providers to profit by betting against and sabotaging their clients! 

To be forced into margin, outside of market hours, and then closed out of trades based upon a materially inferior and invented price, would normally seem unjust. However, as I've already mentioned, these providers have it all "legally" sewn up from the outset . ASIC has done precious little (if anything) to prohibit such unseemly business practices.

I know that it will be of little consolation, but I've included a link to an FOS' response to an ASIC submission. I was personally heartened when I read it, largely on account of it demonstrating an awareness of some of the key issues that need to be addressed before we can have any real confidence in the integrity of the OTC CFD industry. I like to believe that this and other situations may have been prevented had ASIC chosen to recognise and enact FOS' suggestions.
http://www.fos.org.au/home-page/search-results/?orderby=rank&rpp=10&rst=All&str=ASIC+CP+146&type=and&xcid=181


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## RADO (21 December 2013)

From a Financial planner point of view what Hodgie said is spot on.


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## sumit gupta (23 December 2013)

Thanks guys for your valuable comments. I must try all options available given the amount involved are huge and I am stressed too much.

Thanks again.


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