Think you have grounds for a CFD Trading claim? Review the essential steps and contact us for a free initial consultation to find out your options.
What a CFDs?
CFD trading is typically a short-term agreement where you invest in the value of a particular asset.
Typically, people invest in an asset by purchasing shares. The investor would then own the whole or part of the asset in which they have invested. If the asset then increases in value, the investor will be able to sell their shares at a higher price than they purchased them, which will give them a return on their investment.
However, with CFD trading, an investor never actually owns the asset; you are betting on the value of the asset increasing or decreasing.
When you trade CFDs, you are agreeing to exchange the difference in the price of an asset from the point at which the contract is opened to when it is closed.
CFD trades are available on thousands of products, including shares, indices, currencies, commodities, interest rates, and bonds.
What is leverage or ‘trading on margin’ with CFDs?
Leverage in CFD trading is the means by which you can gain exposure to a large position without having to commit the full cost at the outset. For example, you may only put up 20% of the costs at the outset and then set yourself a leverage ratio.
Leverage trading is often seen as an attractive proposition as it allows you to spread your capital further or to invest in shares that you would not ordinarily be able to afford to invest in.
What investors often fail to realise is that by having a leverage ratio, you are exposed to hugely magnified losses, which can in some cases exceed the deposit and leave the investor in a position where they owe substantial sums to the trading platform.
‘Trading on Margin’ is another way of describing leveraged trading. The investor will deposit a sum of money to open a position called a ‘deposit margin.’ The investor will then be required to have a ‘maintenance margin,’ which is a minimum sum of money held within their account to keep the positions open.
If your account falls below the ‘maintenance margin’ and you do not deposit additional funds into the account, then the position will be closed and any losses at that point will be realised.
Why are CFDs not a suitable investment for retail consumers?
Due to their complex and high-risk nature, CFDs should only be offered to sophisticated investors and those who can afford to lose their investment.
It is estimated that between 75-80% of retail customers who trade CFDs lose money. It is this frightening statistic that led to the FCA investigating the sale of CFDs to retail consumers.
On 1st August 2019, the FCA imposed a permanent restriction on the sale of CFDs and CFD-like options to retail consumers.
The restriction applies to firms acting in or from the UK and will:
- ban the sale, marketing, and distribution of binary options to retail consumers.
- restrict the sale, marketing, and distribution of contracts for difference (CFDs) and similar products to retail customers.
The FCA estimates that this restriction could save retail consumers up to £17m per year in lost investments and may reduce the risk of fraud by unauthorised entities claiming to offer these products.
How to know if I have a CFD trading claim?
Contact Oakwood Solicitors free of charge to find out if you are entitled to compensation on a ‘No-Win, No-Fee’ basis.
We have helped clients recover in excess of £1.6 million for mis-sold investments in the last 12 months.
If you can answer YES to any of the below, you may potentially have a claim.
- Retail investor: Were you an investor who only held basic investments, such as shares and bonds in secure reputable companies or held no investments at all?
- Risk consideration: Did the advisor fail to explain the risks associated with the investment, including the potential of losing your investment?
- Pressure: Did you feel you did not have time to get independent advice, research the investments, or take your time to decide if you wanted to proceed? Where were you pressurised to act quickly or risk losing out?
- Contact: Were you contacted unexpectedly and encouraged to trade CFDs?
- Knowledge: Did you invest in something that you didn’t really understand? Did you have little or no knowledge of how CFDs worked?
- Losses: As a result of the investment, have you suffered a financial loss?
Frequently asked questions:
How long does a claim take?
There are a number of features that will impact how long a CFD Trading claim may take to conclude.
These include the complexity of the case, whether the claim is against an active adviser, the Financial Ombudsman or the FSCS, and whether liability is admitted or denied.
If liability is admitted, then the claim process is much shorter, and we would expect a claim to be concluded within 3-6 months. Alternatively, if liability is denied and the claim must be issued in court, then the claim can take between 12-18 months, depending on the availability of the court.
If the claim has been made against the FSCS, then we would expect the claim to be concluded within 6 months.
As each case is unique, it is difficult to provide a generic timeframe for the conclusion of the claim; however, Oakwood Solicitors will give you an indication of how long your claim is likely to take to conclude as part of our initial review.
How much will it cost you to make a claim?
We operate on a Damages-Based Agreement (“DBA”) more commonly known as a ‘no-win, no-fee’ agreement. If we fail to secure you a settlement, you will not be charged.
How much compensation will you receive?
We cannot provide an exact figure until we have completed our investigation, as your loss will be dependent on the amount invested and the nature of the investment.
The general purpose of a pension claim is to put you back in the position you would have been in, had you not received the negligent advice to trade CFDs.
If your claim is against an active adviser, then the sum of compensation that we will seek to recover will be equivalent to any losses that you have suffered.
If your claim is against the Financial Ombudsman, then the compensation cap is £150,000.00. This means that the Financial Ombudsman can award compensation up to a maximum of £150,000.00.
If your claim is against the FSCS, then the compensation cap for any firm that was declared in default on or before the 1st of April 2019 is £50,000.00. If the firm is declared in default after the 1st of April 2019, the compensation cap is £85,000.00 per person, per advisor.
Why should I use a solicitor?
CFDs are complex financial products, and you need to be able to articulate the problem with reference to any legal or regulatory frameworks.
By using a solicitor who is a specialist in CFD claims, you will ensure that you put your best case forward and maximise your chance of success.
We have seen numerous cases in the past where mis-selling victims have pursued a legitimate claim themselves, only to have it turned down due to a technicality or because key grounds have not been particularised.
You have a higher chance of success by working with a Solicitor, who will ensure that there are no technical grounds for turning down your claim and put you in the best possible position to receive what you are owed.
Further information:
Oakwood Solicitors: CFD Trading
WHAT TO DO NEXT:
If you believe or feel you have a CFD Trading claim, contact us for a free initial consultation regarding your options.
Choose one of the methods on the right-hand side of this page or call us on 0113 323 2784 to find out how we can help you with your enquiry.
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Danielle Lightfoot is a Director and our Head of the Financial Litigation Department. Danielle joined the firm as a Paralegal in 2011 and qualified as a solicitor in October 2014. She has acquired ext…
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