Rules for filing a complaint against the broker to the regulator
Order of filing a complaint against the broker to CySEC, FCA, ASIC and IFSC; reasons for filing a complaint, rules for preparing a complaint to the regulators and the ombudsman
A regulator is the highest instance that can help sort out disputes between a trader and a broker. True, regulators don’t examine private claims in most cases, sending traders directly to the ombudsman. However, every claim submitted can be the last drop for a broker-violator. What you are going to learn from this article:
In what cases is it reasonable to make a complaint? What is the difference between European and offshore regulators? How to correctly submit a complaint to CySEC, FCA, ASIC, and IFSC? What are the chances to win the case?
How to file a complaint to the regulator against the broker
Almost every broker is licensed by this or that regulator whose jurisdiction applies to the broker’s main office. Some brokers are licensed by several regulators, but, as the past experience has shown, that’s little help for traders. Let’s remember the most famous bankruptcies of the past years: WorldSpreads, MF Global, MMCIS, Panteon Finance - in all those cases, the regulators were powerless, yet not completely useless. The traders’ mass complaints allowed preventing a total flight of capital from the brokers declared bankrupt, and getting back 50% of the money. Not very much, but better than nothing. Read on to learn in which cases you can file a complaint to the regulator, how to submit it correctly, what you can get (using the example of CySEC (Cyprus), FCA (Great Britain), ASIC (Australia), and IFSC (Belize)).
Complaint against a broker: reasons, goals, submission rules
First, we need to specify a few points:
● Any attempt to resolve a dispute with a broker should start with contacting the broker’s support service. None of the regulators will take up a claim if a trader hasn’t tried settling a dispute with the broker first. Only when the broker gives an official answer and the dispute is not resolved, the trader can make complaint to the regulator on the basis of the previous communication with the broker;
● A complaint is made to both the regulator and the ombudsman of the broker’s jurisdiction;
● The broker’s department you work with is important too. European regulators allow working only with the residents of the region, therefore offshore departments are created for Asian and other markets. If a broker is licensed by CySEC or FCA, but a trader works with a department registered in Belize or the Marshall islands, there’s no point in filing a complaint to European regulators.
Theoretically, the fact of having a licence shall mean that:
● The regulator monitors thoroughly the company’s financial reports and assesses the broker’s sufficiency of capital and solvency on the basis of external audit;
● The regulator controls strictly the rules of segregated accounts management; the traders’ accounts are separated from the broker’s accounts. The latter can dispose only of its own funds;
● Conflict of interest is excluded.
In practice, traders have always disputed and will always dispute with brokers. The most frequent reason is a problem with withdrawing money. Though it can be traders’ fault in part, as they don’t read the broker’s public offer and violate the broker’s trading rules, brokers themselves may tend not to pay money back under any pretext.
The cases when it’s reasonable to file a complaint against a broker:
● A trader’s rights have been violated: there’s a 100% confirmation that the quotes have been manipulated, the money isn’t paid back with no reason given, the account has been blocked with violation of the public offer (agreement); indications of bankruptcy;
● The broker refuses point-blank to perform its liabilities and doesn’t attempt to understand the client, persisting in its opinion. The problem hasn’t been resolved through the support service;
● The sum of money unpaid is really big. It is logical that a complaint worth $100 will hardly be examined. However, there’s no lower limit for examining a complaint, so it’s worth making an attempt in any case.
You’d better provide for eventual communication with the regulator beforehand. Alas! A lot of traders’ complaints are declined by the Commission due to the lack of evidence, that you should collect in advance, just in case. Here are a few tips:
● Before making a deposit, make sure that you’ve been verified and there won’t be any issues connected with verification in the future;
● Keep evidence of deposits (E-wallet/card statements, screenshots of your client profile) to show that the money was really paid into the account;
● Screenshot everything that can be useful in the future: the charts of the trading platforms, the profit you get. Most often, a broker is not a tax agent and therefore it is obliged to provide account statements. Request such statement from time to time. In case your account is blocked, screenshot your personal profile;
● Keep any messages from the support service.
If any dispute arises, the trader’s first step is to contact the broker’s support team. A claim must be as concrete as possible and contain: the account number, the date of dispute, the essence of the matter, with as many numbers as possible (sums, quotes, timeframes). There must be information on what happened before the problem emerged. It’s logical that a request like “The platform isn’t working properly and the broker refused to help” will be declined.
1. Order of filing a complaint to CySEC
CySEC is a regulator of Cyprus chosen by many brokers operating on the territory of Europe and the CIS. This jurisdiction is considered to be offshore, but CySEC operates in accordance with the MiFID directive, i.e. it acts within the European legal framework. The regulator’s site is at cysec.gov.cy/home/.
● Attention: this regulator doesn’t examine individual claims, but all claims are considered when exercising control. So, it’s worth filing an individual complaint and it will be considered, but a private dispute isn't likely to be solved. That’s why it’s better to prepare a collective claim. Though, CySEC’s site doesn’t specify how many traders need to sign a claim so that the regulator will take action. The regulator asks traders to inform it of the problem, but recommends that they contact the ombudsman of Cyprus directly for sorting out disputes (at financialombudsman.gov.cy). A complaint form is located in the “Forms” section or can be downloaded here.
The first step is to check if the broker is currently licensed by the regulator. Actually, it shall be done at the very beginning of trading with the broker, but those who read the regulator’s news in which the information on the licence revocation may be published are few. There are several ways of checking a licence:
1. Type a licence number in the search bar on the main page. The site will instantly provide a link to the broker, the date of licence receipt (Created) and the date of update (Modified). It means the licence is effective.
2. Find the company in the company register by name. An important moment: the name of a trademark or brand familiar to everyone may be different from the legal entity’s name. In the “Regulated Entities” section, choose the “Investment Firms (Cypriot)” subsection. Type the legal entity’s name in the alphabetical index (it’s usually specified on the broker’s site next to the licence number, in the contact information section, or at the bottom of the site). For example, for the LiteForex broker it’s “LiteForex Investments Limited”).
The second way of looking for the broker is better as you can see more information, including the registration number, phone numbers, address and domain name (site).
If the broker isn’t on the list, there’s no point in making a complaint. If the company is on the list, move to the next stage - filing a complaint. To do so, go to the “Investor Protection” section and then - to “Complaint Regarding CIFS”. The page is subdivided into several blocks with a short instruction on how to fill them in.
1. The first block is simple. Here you should enter your personal details, including ID, phone number, and residence address. You shall use only Latin characters. If you’ve got an international passport, it’s better to indicate its details too. The regulator’s representative can use these details for contacting the trader, that’s why it’s important that all information should comply with global standards.
2. The second block is important too. Here, you should specify the company’s registration name as it was mentioned above and the broker’s registration number (as shown in the first screenshot). Let’s examine in detail the list of eventual reasons for filing a complaint. It looks like the following:
Let’s look at the list at greater length:
● Execution of orders. Any claims regarding the execution of orders belong here: slippages, delays, wrong quotes, etc;
● Investment advice. Any claims concerning the broker’s inaccurate advice. For example, inaccurate trading signals. True, a complaint can be filed only if the broker promised 100% trade success. In practice, brokers state that all risks are assumed by the trader who decides whether or not to use a signal.
● Portfolio management. Complaint against an investment company whose portfolio information doesn’t correspond to the reality.
● Quality or lack information provided to the client. Complaint regarding a deliberate cover-up of information on services or technical issues. For example, unreliable information concerning the profitability of an option or the absence of information on the processing of a bonus. Though, it will be hard to prove the broker guilty as these terms are set out in the public offer or bonus promotion terms. The fact that traders don’t read them is another question;
● Terms of contact/feed/charge. Any breaches of public offer terms, including the problems related to money withdrawals or incorrect calculation of commission fall within this section;
● General admin/customer services. Any complaints related to general user settings, account blocking;
● Unauthorised business being offered or carried out. Any claims related to breaches of EU’s laws by the broker;
● Other. Any other reason that doesn’t fall within any of the points above.
Also, a trader needs to choose the financial instrument and specify the disputed amount. For Forex and binary options, it’s point 6 (Options, futures...). The rest applies to the stock market and investment companies. All drop-down lists are linked to pop-up windows through which the problem can be set out more thoroughly.
It’s hard to say how much time it will take to examine a complaint. It sometimes takes a couple of weeks - but just for giving a preliminary call to get confirmation materials. It only depends on the amount specified in a collective claim and the number of dissatisfied traders.
2. Order of filing a complaint to FCA
The steps are identical to the ones described above. A complaint itself is made to the British ombudsman (financial-ombudsman.org.uk) and copied to the regulator. But there’s a difference: the licence of the British regulator is much more valuable than the one of the Cyprus regulator. At the least, the entrance and annual membership fees are much bigger here. That’s why no broker would agree to lose a FCA licence with no weighty reason (while there are numerous examples of brokers changing their offshore jurisdictions).
A complaint to the ombudsman shall be filed within 6 months from the date of dispute. Before that, a trader is given 8 weeks to sort out the dispute directly with the broker. Once a plausible claim has been submitted, the ombudsman contacts the broker to clear the situation. If the trader is right, the complaint will be satisfied quickly.
A complaint form can be downloaded in .doc format on the main page “How to complain” or using this link. The form contains 3 pages where trader needs to specify his/her personal details and the information on the broker (unlike at CySEC, no tips will be provided here), and answer leading questions. The advantage of the form is that it is emailed, so the whole of evidence can be attached to the message.
When it comes to filing a complaint directly to FCA, the things are not so simple as with CySEC. Also, the “Consumers - How to complain” section says that individual complaints are not considered. But if the Cyprus regulator at least provides a collective claim form on the site, FCA immediately suggests contacting the ombudsman or circuit courts. By the way, the chance of winning a case is much higher in the UK than in offshore jurisdictions or courts. Though, one must be ready to translate all documents into English and notarize them, if possible. You decide if financial and time expenses are worth your account balance.
3. Order of filing a complaint to ASIC and IFSC
Relying on its site, we can see that the order of filing a complaint to the Australian regulator ASIC is somewhat different. Firstly, the regulator doesn’t send a trader directly to the ombudsman or courts. On the contrary, ASIC declares that nearly 20,000 claims of private clients against any financial structures (including brokers) are examined annually. On the other hand, the scheme of submitting a claim is complicated. The first page we need to start getting familiar with the rules of filing a complaint is at asic.gov.au/about-asic/contact-us/how-to-complain/. Next, we need to click on the links or watch the related video. The video doesn’t clear the situation, though. It’s impossible to find the complaint form either.
The offshore regulator of Belize - IFSC - is very popular with European brokers too. But the problem here is the same as with ASIC: there’s no information on how to submit a claim or where to get a complaint form on the regulator’s site. There’s only an email address. Sending a claim which doesn’t conform to the required sample to that address means you aren’t likely to get any answer.
● I think you’ve already noticed the striking difference between offshore and little known regulators and those with a flawless reputation. Even if there’s no guarantee that a private trader will get his/her money back, reliable regulators can detect a broker’s eventual weak spots in advance. It will partly reduce risks.
Conclusion. Attempts to sort out a dispute with a broker through the courts are most likely to fail since there are no direct legislative norms and legal levers of influence over brokers (though, there have been cases of recourse to a court). Regulators and chargebacks are the last hope to get one’s money back. Still, it does not necessarily mean that a complaint against a broker will help resolve the problem. But, in any case, it will be a signal for the regulator about potential problems. A few complaints will be ignored. But a thousand of them will be a reason for taking measures. So, if you are confident in your forces and your claim is reasonable, you should attempt to battle for your interests. A regulator is a mere supervisory authority, and first and foremost you need to address the ombudsman of the regulator’s country.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.