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Filing a Complaint Against a Forex Broker in the UK: How-To

Jun 20 2013

If you have been following us regularly, you have probably noticed that we actively promote broker regulation, and there's a simple reason for that: regulators ensure a much, much higher level of investor protection and fair operations on behalf of brokers. 

Which is not to say that a regulated broker can't go down and declare bankruptcy, or cheat its clients in another way – unfortunately these things do happen (think of the heavily regulated MF Global and PFG Best for example). 
Then again, this is where regulation kicks in, backing investors up and helping them in their attempts to recover what they have lost through procedures, rules and compensation schemes that have been set. 
With this, we are beginning a short series of articles on filing complaints with different regulators. We hope you'll never have to put this knowledge to practice but hey – better safe than sorry. 

Filing a complaint in the United Kingdom

Before we describe the grievance procedure, we need to clarify that UK's regulator, the Financial Conduct Authority (FCA) does not, in fact, participate in solving conflicts between brokers and customer. Rather than that, the regulator focuses on preventing of scams and unfair practices from happening, for example by mandating financial services providers to establish complain submission procedures.
In case a dispute occurs, however, the FCA advises investors to follow three steps, here they are. 
Step 1: Try to solve the issue by contacting the broker
Get in touch with the broker and complain straight to it – often conflicts are caused due to misunderstandings, and an amicable solution is easy to achieve through communication. What's more, as we mentioned, as per FCA's rules all authorized companies must have an established procedure for handling complaints, so in theory the process is streamlined and resolving common conflicts should be done quite quickly.
Useful tip: It is best to handle the communication with the broker in writing – this way both parties can keep track of the issue and can monitor what has and has not been done. 
Another useful tip: Be patient, especially if your claim is a more complex one. It can take up to 8 weeks until you get a response from the broker. If eight weeks have passed before you get an answer to your complaint, however, move on to the next step. 
Step 2: Approach the Financial Ombudsman Service. 
If the broker has not addressed your claim within reasonable time (minimum 8 weeks), or if you unhappy with the final answer received, you can go ahead and contact the Financial Ombudsman Service (FSO). The FSO is a free service with one main function: settling disputes between the customers of financial services companies and said companies. The scope of the FSO is quite large, and forex trading is covered. 
After that, the FSO will mediate between you and the broker to find and close the case as “win-win”. 
Useful tip: Don't wait too much. If more than six months have passed from you receiving a final response to your complaint from the broker, the FSO may not b able to help you out and address the issue. 
Step 3: Hire an attorney and take the issue to court
If the FSO's decision is not what you believe is the right decision, you can take the case to court. Obviously, that should be your last resort as it would require you to invest quite a lot of time and money – as you may know, the legal system is often slow, and lawyers charge crazy fees. 
Useful tip: If you are residing in England, Wales or Northern Ireland, take the claim to the country court of High Court. Scotsmen should probably approach the Sheriff Courts first.

Claiming funds from the FSCS

If you are a British investor, then you most probably know that in the unlikely (and unlucky) case that your broker goes broke, you are protected by the Financial Services Compensation Scheme (FSCS).  The maximum amount of money that you can claim is £50,000.
It is recommended that you submit your claim with the broker first, and do so as quickly as possible – and keep in mind that the FSCS will not honor a claim if the broker has enough assets or funds to pay the claim itself. 
If the FSCS considers the broker  to be ‘in default’, which means it is unable, or likely to be unable, to pay claims against it itself, the FSCS will try to contact all customers of the broker to provide a compensation application form.
TAGS: forex  forex trading  forex broker  forex regulation  FCA  bankruptcy  financial services ombudsman  financial services compensation scheme  FSCS 

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