Australia’s Financial Ombudsman Service registers 14% Y/Y rise in derivatives & securities disputes in 2016/17

Maria Nikolova

One of the problems is that most retail investors do not obtain personal financial advice before trading in CFDs, which were at the centre of 29% of all derivatives disputes in 2016/17.

The Australian Financial Ombudsman Service (FOS) has earlier today posted its Annual Review for the 2016-17 financial year (the year to June 30, 2017), with the data underlining the growth in disputes concerning various financial products, such as derivatives/hedging instruments, which include contracts for difference, foreign currencies, forwards, futures, options and swaps.

In 2016-17, FOS accepted 113 disputes about these products, accounting for 9% of investments and advice disputes. The most common issues in this category were Financial services provider (FSP) decision (35%), disclosure (17%) and service (12%). Nearly a half (46%) involved foreign exchange transactions, followed by CFDs (29%).

FOS saw a 14% increase in the total number of disputes involving securities and derivatives in the past year and noted the importance of understanding the risks associated with products like CFDs.

In its Regulatory Guide 227 (RG 227), the Australian Services & Investments Commission (ASIC) noted that the complexity and risk of CFDs means they are unlikely to be appropriate to meet the investment objectives, needs and risk profile of many retail investors. ‘The problem is exacerbated given most retail investors do not obtain personal financial advice before trading in CFDs,’ ASIC said. Several recent disputes have concerned whether the FSP undertook an inadequate assessment of a client’s suitability to open a trading account.

Also, FOS said in its report, online platforms trading in derivatives and hedging products are often based on unilateral client agreements that are drafted to give the FSP power to protect their interests by reversing or cancelling contracts, varying prices or correcting ‘errors’.

Several of the recent disputes that FOS had to handle were about the right of an FSP to rely on its terms and conditions to close out positions. Other disputes were about the FSP’s platform being unreliable, causing the applicant loss because they were unable to trade. In such disputes, FOS consider the FSP’s conduct and rights in the context of what is fair in the circumstances and not just strict adherence to the terms and conditions.

Australia’s dispute resolution framework is about to change, with FOS backing the establishment of a single external dispute resolution body to be called the Australian Financial Complaints Authority.

Read this next

Institutional FX

Fortex adds GBE Prime to liquidity offering

“This collaboration enhances our liquidity distribution capabilities, offering our clients improved pricing, order execution, and risk management. We look forward to the positive impact this integration will have on our clients.”

Retail FX

Fullerton Markets Caps Off Stellar Year with Dual Triumph at Gazet International Awards 2023

Fullerton Markets, one of the fastest-growing brokerages in the Asia Pacific, has today announced its remarkable success at the prestigious Gazet International Awards 2023, where it secured two coveted accolades, reinforcing its position as a global leader in multi-asset brokerage and marketing a triumphant end to the year.

Inside View

Are brokers really ready for EMIR Refit and ESMA changes in 2024?

The EMIR Refit and ESMA reporting requirements necessitate a strategic approach from brokers, involving major updates to reporting systems, data collection processes, and internal resources. We spoke with brokers and RegTech providers to learn more about the upcoming regulatory challenges.

Digital Assets

Binance to phase out BUSD support in two weeks

Binance has announced its plans to gradually phase out support for its native stablecoin, BUSD (Binance USD) by December 15, 2023. This move comes after Paxos, the issuer of BUSD, decided to stop minting new tokens.


Binance Labs invests $3.15M in Open Campus to advance Web3 education

Binance Labs, the venture capital arm of the cryptocurrency giant Binance, has invested $3.15 million in Web3 education platform Open Campus.

Institutional FX

Brighty App unveils EU B2B payment platform amidst exploding market

Brighty App is set to launch its European B2B platform, Brighty Business, this month. This platform is geared towards improving how businesses handle their financial operations, especially in the digital banking and cryptocurrency domains.

Digital Assets

Celsius’ withdrawal process slowed by overwhelming demand

Bankrupt crypto lender Celsius is taking steps to allow certain customers to withdraw their funds. However, some users have reported difficulties in logging in to process their withdrawals, as indicated by posts on various social media platforms.

Digital Assets

Cristiano Ronaldo hit with $1 billion lawsuit over Binance NFTs

Cristiano Ronaldo, the renowned footballer, is facing a class-action lawsuit in the United States over his promotion of Binance, the world’s largest cryptocurrency exchange.

Digital Assets

Zipmex creditors offered 3.35 cents on the dollar payout

Zipmex, a Thai crypto exchange grappling with financial difficulties, has proposed a restructuring plan to repay its creditors.