Marama had an options trading account with a trading platform for a couple of years. Marama regularly made use of the trading platform’s margin facility – a service that allows investors to borrow money from the trading platform to purchase shares.
In early 2024, Marama bought a dozen options on the trading platform. An option is a contract that gives the buyer the right to buy or sell a certain amount of stock at a predetermined price within a certain time period. Marama used the trading platform’s margin facility to buy $2 worth of options. After Marama’s purchase, her account balance was 30 cents.
Two days later, the trading platform deducted 50 cents of interest from Marama’s account. The trading platform then sold Marama’s options to recover her negative balance.
Marama complained to FSCL.
Dispute
Marama wanted the trading platform to pay her $1,500 because she felt that the trading platform sold her options suddenly and without warning. Marama said that the value of her options had increased significantly after the trading platform sold them. Marama was unhappy that the trading platform had taken up a lot of her time during their internal complaints process.
The trading platform offered Marama $200 to settle her complaint. The trading platform believed that Marama was aware of their interest deductions, because she had been using their margin facility for a couple of years. The trading platform also said that Marama would have received an email to alert her that interest would be deducted from her account.
Review
We looked at the parties’ contract, the information disclosed on the trading platform’s website, and the correspondence between the parties. We saw that the trading platform were entitled to charge interest on their lending, to deduct that interest from clients’ trading accounts, and to sell clients’ options to recover negative account balances.
We decided that the trading platform’s offer to settle Marama’s complaint was reasonable, because it was significantly higher than the price of Marama’s options.
Resolution
We recommended that Marama discontinue her complaint. Marama agreed to do so.
Insights for consumers
It is important to be aware of your rights and responsibilities when borrowing from a trading platform to finance your share purchase. Trading platforms should disclose their procedures for margin facilities in their terms and conditions, and on their website.
