Insights for consumers
The law requires all investment product risks to be clearly outlined in product disclosure documents, so investors can understand what they are investing in and the potential risks involved.
Contracts for difference (CFDs) are particularly complex and carry a high level of risk. Before investing, read the disclosure documents and Terms and Conditions carefully to understand your responsibilities and assess whether you can afford the risks.
Important operational details, such as how the investment works in practice and what you need to access and use the services effectively, are often included in these documents.
What went wrong with Mārama’s trades?
Mārama lost money trading CFDs and believed this was due to inadequate platform performance. She said that trading price changes due to market volatility, or without warning or announcement, represented a failure of the platform. She experienced data feeds stopping abruptly and said her accounts were sometimes liquidated because the platform had frozen.
Mārama complained to the provider several times. The provider investigated each complaint but found no evidence of platform issues or outages affecting other users. The provider advised Mārama to contact their client management team when experiencing problems, so they can help with:
- resolving any issues
- making trades in real-time
- minimising costs and avoiding liquidation losses.
How the provider investigated the platform issues
During their technical investigations, the platform provider discovered that Mārama was sometimes trading with multiple tabs open or using simultaneous logins, with extended login durations. Mārama’s use of the platform, including charts and complex layouts, required high data processing demands.
The platform provider made suggestions to improve performance:
- check device processing capability
- clear cookies and caches regularly
- check internet connectivity.
The provider concluded that the issues were likely caused by Mārama’s use of platform features, device performance and occasional network connection issues.
Mārama arranged for a professional internet provider to test her network connections, which showed that her connections were adequate. She took this as proof that the problem was with the platform.
Mārama complained to FSCL.
FSCL reviews the platform
We reviewed Mārama’s issues with the platform, the provider’s explanations and Mārama’s networking test results.
Although we acknowledged that the internet assessments Mārama provided were accurate, the tests were conducted after the platform issues occurred. We found the platform provider’s technical investigations and explanations to be reasonable.
We reviewed the provider’s disclosure documents, terms and conditions, and website, which clearly explained the:
- high risks involved in CFD trading
- possibility of sudden price changes and market volatility
- need for suitable devices and a stable internet connection for optimal performance.
We found that the liquidation of Mārama’s account was allowed under the platform’s terms and conditions. The provider also offered optional tools to help manage risk, which Mārama did not use.
FSCL reviews the platform
Although Mārama’s losses were unfortunate, we found that; given the clear risk disclosures, it would not be fair to require the provider to compensate her.
We encouraged Mārama to discontinue her complaint.
The complaint was not upheld.
