Insights for consumers
Contracts for difference (CFDs) are complex financial products that carry a high level of risk, meaning they are not a suitable investment for most consumers.
With the increased risk comes greater opportunity to make investment gains. The law requires all investment product risks to be clearly outlined in product disclosure statements (PDS) so that you can properly understand what you are investing in and what the risks are. This helps you understand your obligations and whether you can afford to take the investment risks.
What happened?
Tane complained about a trading platform that offered CFD trades, which he compared to gambling. He lost $150,000 on the platform with large losses concentrated in one week, and he felt the provider should have done more to block his account.
Tane thought the trading platform should have had better controls in place to identify or address problematic trading behaviour, especially for inexperienced retail investors. He thought customer vetting should be stronger and that risks for trading CFDs should have been better highlighted. Tane also thought that investors like him could be better protected, like introducing deposit limits so that large sums could not be lost quickly. He believed the trading platform’s focus on making a profit, rather than protecting investors, caused him both financial and emotional harm.
The trading platform disagreed. They said that they verified Tane’s account to the industry standard. They checked for proof of identity, his financial background, and his trading experience.
Tane was provided with information about CFDs and the investment risks, including the PDS. He signed an agreement confirming that the information he provided was accurate and that he had read and understood the documents provided to him and the risks involved.
What was FSCL’s view?
We concluded that the trading platform had followed industry standards for the account opening and that they had provided all the documents that they were required to under the law.
We also concluded that the risks of the investment were very clearly set out, so Tane should have been aware of the risks. The trading platform also provided tools to reduce the risk of losing as much money, but Tane did not choose to use them to avoid such large losses.
Tane said that he felt overwhelming stress from his trading experience. While we empathised with him, it was not fair to hold the trading platform responsible for the stress Tane suffered.
What was the outcome of FSCL’s investigation?
Tane discontinued his complaint. He did not agree with our views on his complaint, but he decided not to further pursue his complaint.
