Victor opened his spread-betting account thinking the most he could lose was his deposit. Three days later, he was in more debt than he could pay back.
Victor complained to us after a business allowed him to open a spread-betting account, with a credit facility he wasn’t told about. He thought the most he could lose was his deposit.
When he opened the account, Victor had completed an assessment to establish whether the account was appropriate for him. This looked at his experience and highlighted the risks – including that it was possible for him to lose more than his deposit.
From the options available to him, Victor chose an account that had no inbuilt caps on either profits or losses, which he’d need to fund with his own money.
Victor deposited a large sum into the account and made a large number of trades within a few days. He lost his deposit and incurred thousands of pounds worth of debt. He contacted the business to explain he was in financial difficulties, and that he’d experienced gambling problems in the past.
He said he’d spent more than he could afford and didn’t think that he should have been allowed to incur this debt. In response, the business signposted Victor to debt advice organisations that could and offered to help him structure a plan to repay the outstanding balance.
However, the business pointed out that they’d carried out checks before opening the account and Victor had confirmed he understood that losses could exceed deposits.
What we said
We were satisfied the business had – under Conduct of Business Sourcebook (COBS) 10 – taken appropriate steps to establish whether Victor understood the risks involved with this type of trading.
The business had relied on the information Victor provided. We looked into what else he’d told them in his assessment. We didn't find anything to suggest he'd mentioned his gambling problems or anything else that would have alerted the firm that he was vulnerable.
We didn’t think the business could have predicted how Victor would trade, or whether he’d make losses.
For those reasons, we didn’t think it was fair for the business to erase the trading losses that Victor had incurred. We were pleased to see the business had proactively signposted Victor to organisations that might help him get back on top of his finances and shown forbearance when dealing with the money he owed them. We asked them to carry on showing sensitivity when it engaged with Victor to work out his payment plan.
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