Geraldine made significant losses on a spread-betting platform. She believed the platform was making money by getting referrals from a workshop that taught poor trading strategies. We didn’t find evidence that the platform gained from clients’ losses. But we told it to compensate Geraldine for not communicating about its relationship with the workshop provider.
Geraldine contacted us after she lost £15,000 trading on a spread betting platform. She said the investment company operating the platform should have made her trade using a demo account before risking her money.
Geraldine explained that, before going on to do the trading, she’d attended a workshop by an unregulated company offering training and strategies for spread betting. She told us she believed that the investment platform was paying the workshop provider for client referrals – and that the trading strategies taught at the workshop were deliberately designed not to work, so the platform could profit from clients losing trades.
Geraldine said she’d asked the investment platform to refund her losses, as well as the cost of the workshop. But the platform disagreed it had done anything wrong – saying it didn’t pay the workshop, and it had made sure she had the experience to trade. Unhappy with this, Geraldine asked us for help.
What we said
There were two distinct parts to Geraldine’s complaint – the opening of her account with the platform, and the relationship between the platform and the workshop provider, an unregulated firm.
The platform had stated that it didn’t offer advice. Geraldine approached it asking to carry out spread betting trading. Given the complex and high-risk nature of spread betting, the FCA requires firms to determine whether the consumer has the necessary experience and knowledge to understand the risks involved before allowing them to trade.
On her application form, we saw Geraldine said she had experience trading foreign exchange, futures and spread betting, and also that she’d attended a relevant training course.
We felt it was reasonable in the circumstances for the platform to allow Geraldine to open an account. Given these requirements had been met, we didn’t think it had done anything wrong by not offering her a demo account first.
We then looked into whether there was any financial relationship between the platform and the workshop provider. When we asked the platform, it told us that it paid the workshop provider a flat fee for marketing its platform – but didn’t pay for referrals or commission.
In our view, the platform should have communicated better with Geraldine about this when she’d asked about the payments. However, we explained to her that marketing agreements like these weren’t unusual, and we didn’t think the platform should reimburse her for the workshop.
Next, we considered whether, if the platform had declared the relationship earlier, this would have affected Geraldine’s trading and losses. We thought Geraldine clearly intended to trade, and probably would have opened the account in any case. Alternatively, she might have chosen another platform, but would likely still have made the same trading decisions and incurred the same losses.
We looked into whether there would have been any advantage for the platform in losing trades made by its clients. However, there was no evidence of any arrangement that would mean the platform would stand to gain if clients ceased trading because of excessive losses – but instead that the platform would gain from continued trading.
While we were able to provide Geraldine with reassurance about some of her concerns, we told the platform to pay her compensation to reflect the distress caused by the fact it hadn’t disclosed the marketing fee.