In early 2021, Harper opened a margin trading account with a trading platform. She deposited Singapore dollars (SGD) to her account and then purchased shares listed on the Hong Kong stock exchange.
Harper assumed her SGD would be automatically converted to Hong Kong dollars (HKD) when she purchased the shares, but this is not what happened. She retained her SGD and borrowed the HKD for the share purchase from the trading platform. Her HKD currency account went into debt and the trading platform charged her interest on the debt.
Around 12 months later, Harper realised she was being charged interest. She converted her SGD to HKD and applied this to the debt, but it was not enough to clear the debt in full.
Harper complained to the trading platform. She did not understand what margin meant and she did not realise her account could go into debt. She wanted the trading platform to waive all interest.
The trading platform agreed not to charge any more interest, but they did not agree to refund interest they had already charged. They offered to settle the debt for HKD13,000, which was around half of the debt owed.
Harper was not satisfied with this response and complained to FSCL.
Dispute
The trading platform did not agree to refund all interest because:
- they were entitled to charge interest under their contract with Harper
- the interest charges were recorded on their monthly account statements
- they were not liable for Harper’s investment decisions.
Harper said she was not liable for the debt because:
- the contract terms did not apply because she did not choose to borrow HKD – she thought her SGD would be automatically converted to HKD
- she did not know about the debt for around 12 months because it was not visible to her on the trading platform’s app.
Review
We concluded that the trading platform’s offer was a fair outcome to the complaint.
It was clear Harper did not fully understand the trading account she had opened and that she was not aware of the HKD debt for around 12 months. However, the fair outcome was that she paid the trading platform some interest.
The trading platform were entitled to charge interest on the HKD debt until it was paid in full. Harper agreed to the trading platform’s terms when she opened her account. She could have selected a different account type when she opened her account if she did not want a margin account, and she could have contacted the trading platform for help if she did not understand the different account types they offered.
Further, Harper should have known about the debt. The trading platform emailed her each month when the account statement was available in their app. If Harper had read the statements, she would have known about the HKD debt and the interest charges.
Resolution
Harper accepted our final decision that she should accept the trading platform’s offer. She agreed to pay the trading platform around HKD9,500 and the trading platform agreed to write off the remainder of the debt, around HKD15,000.
This offer was different to the original offer. The trading platform amended their offer during our investigation because Harper had received cash dividends (paid in HKD), which reduced the amount of the debt owed.
Insights for consumers
It is important to carefully research online investment platforms before deciding whether they are a suitable way for you to invest. Different platforms have different account options – some offer margin accounts, others don’t.
Margin accounts can be high risk. The consumer can use assets held in their account, such as currencies and shares, as leverage to borrow money from the platform to purchase more assets. The platform will usually charge interest on the money borrowed and the consumer can end up in debt if their investments lose money.
The Financial Markets Authority have information for consumers about understanding the risks of online investment platforms.
