Give me my money back, I borrowed it!

Pierre opened a trading account with a trading platform. Over the course of a week, he made a number of trades, resulting in losses of around $17,000 altogether.

During that week, Pierre withdrew $12,000 from his trading account, but after a few days it still hadn’t arrived in his bank account. When Pierre told the platform it was borrowed money that he urgently needed to repay to the bank, the platform closed his account.

 

Dispute

Pierre complained to FSCL about the platform closing his trading account. Pierre said he only told the platform the money was borrowed so they would pay it to him faster. Pierre wanted to continue trading so he could make up some of his losses.

Pierre also complained the platform’s system was increasing some of his trade order sizes so his losses were bigger than anticipated. Pierre wanted to be compensated for these losses.

The platform said they reserved the right to close any trading account at their discretion. The platform was concerned about the vulnerabilities Pierre presented when he said he was trading with borrowed money.

The platform also said they couldn’t see any abnormalities in Pierre’s order logs and the trades executed. The platform said their systems do not allow staff to manipulate trade order quantities, which a customer has to enter and then confirm before they are processed.

 

Review

We reviewed Pierre’s complaint and the information the platform provided, including recordings of their conversations with Pierre.

Pierre had told the platform he was trading with money ‘he could not afford to lose’ and sounded very distressed on the phone. We agreed the platform was entitled to close Pierre’s account following this conversation, because it would be unethical for the platform to knowingly allow him to keep trading with borrowed money. Furthermore, Pierre had breached the platform’s trading terms and conditions, in which he declared he fully owned all money transferred to the platform for trading.

Regardless of whether the money was in fact borrowed or not, we thought the platform had done the right thing. Allowing Pierre to continue trading posed a known risk to both him and the platform.

We also reviewed Pierre’s order log and trade history for any discrepancies. We couldn’t see any instances of Pierre’s order sizes being manipulated.

 

Resolution

We recommended Pierre discontinue his complaint, and the platform pay his remaining account balance to him from his closed account. As this was the final step in our process, we closed our file.

 

Insights for participants

Once the platform had identified Pierre’s vulnerability, it had acted correctly to close his account so he couldn’t trade any further to his detriment. To some extent, financial service providers have an ethical responsibility to protect their customers from harm where they can.

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