Can you sue your Forex broker? – What you need to know
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Forex trading is a risky venture, and most times, people lose more money than they earn. In frustration, the forex trader might blame their broker for the loss and wonder about taking legal action against them.
Although, in truth, the loss sometimes results from unknowingly trading with fraudulent brokers. There are bad brokers and scammers whose aim is to extort money from unsuspecting traders.
These bad brokers come up with different tricky approaches to defraud people, including:
- They manipulate their trading platforms to set traders up for failure.
- They pressure traders into continuously funding their accounts even when they keep losing.
- Bad brokers also manipulate the spreads, causing their traders to pay higher fees in their trading.
- Traders’ accounts are used for excessive trading to generate commission for the broker, while the trader loses money.
- Sometimes, these bad brokers trick traders into placing unfavorable trades that benefit them. (brokers).
And most times, they get away with all these frauds because their victims do not know they can be brought to book. Also, the process of resolving this problem and attempting to get your money back could consume so much time, energy, and money that it wouldn’t be worth pursuing.
Can you sue a Forex broker?
The answer is YES. If your broker has deliberately caused you to lose funds while profiting from you, you can bring a lawsuit against them. If you can prove in court that the broker defrauded you, they will be fined and asked to pay you damages.
One big problem with this lawsuit is that it is often very difficult, not to mention the time and money the process consumes. The chance of you winning the case would be slim, especially if you’re taking on a big forex brokerage firm.
What happens if you sue your Forex broker.
Building a strong case against your broker would be tough. The broker will naturally deny all your claims and being more knowledgeable in the market than you are, they would present strong logical defenses against your accusations.
The legal battle would drain you emotionally, mentally, and financially while the ones you fight with would be unaffected in the same way. You would be battling with a company that already has lawyers and legal advisers in place for situations like this. They would do everything possible to win that case to prevent other disgruntled clients from taking a cue from you.
You will incur a large number of legal fees in the process. If you drop the case in the middle, you would be responsible for the legal expenses of both sides.
The other party’s legal fees are, in fact, a big problem to consider. In a court proceeding, it is believed that the judge is without fault. Therefore, if you lose, all would say it’s because you were wrong. Hence, you do not deserve compensation, and you should be responsible for the other side’s costs in the lawsuit.
The broker would have financial and legal experts handling the case, and they would do and say anything to convince the court that your claims are false. It would not be a fair fight for you if the case is against a big brokerage firm. Your chance of winning and claiming damages would be too slim.
But if your broker is not a big company, it might be less stressful to sue them, and your chance of winning the case might not be so slim.
If you have legal insurance or have a lot of money to spare, and you have a strong case against the broker, it may be worth it to pursue justice here.
How to resolve disputes with your broker without going to court.
As we’ve mentioned, the loss might sometimes not be a result of a deliberate scam on the broker’s part.
Misunderstandings or innocent mistakes may occur while trading and can lead to disputes between both parties.
Other sources of dispute can be misconducts on the broker’s part, such as:
- delays in executing trades
- problems and delays with withdrawing funds from one’s trading account.
- Software bugs on the trading platform
- Misleading or unclear information.
You can resolve misunderstandings and disputes with your broker through mediation.
In some regions, there are independent dispute resolution systems that protect traders’ legal rights if issues occur with a broker. These systems appoint mediators or arbitrators to look into the trader’s claims and resolve disputes between both parties. They ensure the trader receives compensation after investigations and confirmation of the claims.
List of popular dispute resolution systems:
1. Financial Ombudsman of Cyprus
2. AMF, Financial Markets Authority, France.
3. Credits and Investment Ombudsman, Australia.
4. Financial Ombudsman Services, United Kingdom and Northern Ireland.
5. Financial Ombudsman Service Ltd. Australia.
There are also independent forex dispute resolution systems that can be set up by the region’s governing body or a group of forex traders. The mediators would act as middlemen between the forex trader and their broker, examining and settling the disagreements amicably. Filing complaints with them would not attract any legal fees. This process is a much simpler one, and a less stressful way to resolve issues with your broker.
How to file a complaint.
Before filing a complaint, ensure you have all the necessary proof for your claims. The mediators will check both your claims and your broker’s response and try to resolve them.
Note that this process may not earn you compensation in huge amounts like a lawsuit might. And some of these types of systems have set a maximum amount of money that can be paid as damages. Others would not treat your case if your claims are not up to their set minimum amount.
The first step to filing a complaint:
Reach out to your broker first, and report your grievances directly to them. Be patient and give them time to respond. Try to resolve the issue with them directly. Note that the mediators in the dispute resolution system will request proof that you have tried to settle the problem with the broker and failed. They would investigate the steps you took to solve the dispute before taking on the case.
Second step:
Contact the financial dispute settlement system in your region. Do this if your broker does not respond to your complaints after waiting for a reasonable period, in most cases, 7-weeks, or if their responses are not satisfactory.
For issues involving a large sum of money, it is recommended to hire a lawyer who can guide you in the process.
Conclusion
Before filing a financial damages claim with your broker, be sure to weigh the costs. Remember that your lawyer is also looking to profit from the case, so they may not be the best person from whom you can seek advice.
You may win the case and claim damages. On the other hand, you may lose much more and go into serious debt. After weighing all the troubles and demerits of this lawsuit, most people would prefer to bear the loss and change their broker.
FAQ – The most asked questions about Can you sue your Forex broker :
Can you sue your Forex Broker for fraudulent cases? What claims can be made?
There is a problem with the filing of the lawsuit, and it becomes very difficult at times to manage through the dates and hearings. Even the time and money within the process are quite consuming (emotionally, financially, and mentally), and the chance to win is quite slim, especially if you are moving up against any big forex brokerage firm.
Even though difficult, if you can prove in a court of law that you have been defrauded by the broker, they wouldn’t just be fined but will also be asked to pay you an adequate amount of damages.
What would happen if you left the case in between?
In case if you are planning to drop a case in the middle, you will be required to make the payment of the legal expenses of both ends.
Can brokers trade for me?
Make sure to pay close attention to the PoA or the Power of Attorney section. After the PoA is signed, it allows the broker to transact on your behalf of you. There are some investors who will give the PoA for moving the funds from their bank account; this truly can be costly in case the brokerage firm makes the decision to execute the unauthorized trades from their brokerage account.
See our other articles about forex trading here:
Last Updated on January 27, 2023 by Arkady Müller
