Geraldine thought the platform had set her up to fail and made money from referrals from a workshop that taught poor trading strategies.
What happened
Geraldine wanted to use a spread betting platform run by an investment company. Before doing any trading, she attended a workshop by an unregulated company offering spread-betting training and strategies. However, when she started using the platform, she lost £15,000.
Geraldine concluded that the investment platform and the workshop provider were working together. She believed the platform was paying the workshop provider for client referrals. And she thought the workshop provider was deliberately giving out bad advice so that the investment platform would make money when clients like her lost trades.
She also felt the said the investment platform should have made her practise trading using a demo account before risking her money.
Geraldine asked the investment platform to pay back her losses and the cost of the workshop. But the platform didn’t agree that it had done anything wrong.
It said it didn’t pay the workshop provider commission or money for client referrals, and it had ensured she had the experience to trade. Unhappy with this response, Geraldine brought her complaint to us.
What we said
There were two 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. Given the complex and high-risk nature of spread betting, the Financial Conduct Authority 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, Geraldine said she had the right experience. She also said she’d attended a relevant training course.
So, we felt it was reasonable 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. The platform told us that it paid the workshop provider a 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. We didn’t think the platform should pay her back for the workshop.
Next, we considered whether it would have affected Geraldine’s trading and losses if the platform had mentioned the relationship earlier. We thought Geraldine clearly wanted to trade and probably would have opened the account anyway. Alternatively, she might have chosen another platform but would likely still have made the same decisions and had similar 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 gain if clients stopped trading because of excessive losses. Instead the platform would gain from continued trading.
We reassured Geraldine about some of her concerns. We told the platform to pay her for the distress caused by the fact it hadn’t disclosed the marketing fee.