The Financial Industry Complaints Service (FICS) has ruled against a contracts for difference provider and awarded restitution costs to the complainant.

Contracts for difference (CFDs) are highly leveraged derivative products which have been popular in the UK for some time but are a recent arrival in Australia. Despite the relatively short time the products have been available in Australia, about 10 complaints have been layed against CFD providers. Last month FICS ruled for the complainant on the grounds that the CFD provider, the Australian subsidiary of a UK online financial services business, had “poor and misleading processes” in regards to its guaranteed stop-loss orders (GSLO). The complainant had asked for full recovery of the $25,800 loss on his CFD orders because the provider had failed to properly explain how the guaranteed stop-loss order process worked. The CFD provider had already paid out $945 (the remainder of his account) to the aggrieved client and estimated he had suffered a loss of $2,580 because it had failed to implement the guaranteed stop-loss order. The firm had already offered to pay its client the $2,580 less the $945 already paid. FICS could only award the complainant this amount – $1,635 plus 5% interest from the date the member failed to implement the GSLO. As well, FICS ordered the member refund the premium paid for placing the GSLO plus 5% interest “The complainant has sought further damages that do not directly flow from the member’s failure to honour the GSLOs. These are consequential damages. I am not able to award consequential damages under the FICS Rules and this is a large aspect of the complainant’s claim,” Michael Arnold, FICS adjudicator, said in his judgment. FICS chief, Alison Maynard, said more CFD complaints are expected. “We’ve already arranged training for some of our staff on CFDs,” she said.

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