Proposed class action for alleged victims of IG Markets CFD products
The defendant to the proposed class action will be IG Markets Limited, a UK-backed financial services firm. The claim will allege that IG Markets has consistently marketed complex CFDs to inexperienced investors and facilitated those investors to trade in CFDs without applying adequate checks and balances.
CFDs have been banned in some other countries, including the US, and are likened to gambling on financial markets. The Federal Court of Australia has described these products adversely in the past.
The Australian Securities and Investments Commission (ASIC) last year imposed strict new conditions on CFDs to protect inexperienced investors after reviews by the regulator found that 72 per cent of retail clients who traded CFDs lost money. According to ASIC, the average loss of these investors between 2016 and 2021 was approximately A$9,000 a year, in circumstances where close to 70 per cent of clients earned an annual income of A$80,000 or less. In recent years, ASIC has also successfully brought proceedings against a number of CFD licensees operating in Australia, with penalties awarded in excess of A$75 million.
The regulator’s stance on these products shows a very real concern that these unsuitable investments have been sold to unsophisticated and vulnerable retail investors.
The proposed class action will be registered in the Federal Court, following further investigation by Piper Alderman and Omni Bridgeway. ASIC data suggests total losses by investors with IG Markets of over A$800 million.
Piper Alderman Partner, Martin del Gallego, said “there was now overwhelming evidence that highly-leveraged CFDs should never have been marketed to everyday Australian investors who had little or no experience in trading such complex products”.
“CFDs are little more than a form of gambling which has left tens of thousands of Australians out of pocket,” Mr del Gallego said “Our proposed class action will seek to recover these losses for investors who should never have been exposed to trading in such complex, high-risk products.”
A CFD is a ‘leveraged’ financial product that enables investors to take a position on the movement of an underlying asset – such as a share, a share price index, a commodity, a currency or even a crypto currency – without owning the asset itself. The investor pays only a fraction of what the underlying asset is worth and bets on whether the asset will increase or decrease in value. If an investor bets correctly, they can generate significant profits. But if they bet incorrectly, their losses can be equally significant, and can far exceed the amount of their initial investment.
The claim will allege that investors suffered losses in circumstances where their objectives, financial situations and needs were inadequately assessed and where the risks of investing were inadequately disclosed. It is anticipated the class action will advance allegations of unconscionable conduct and misleading and deceptive conduct.Individuals who have suffered losses through trading CFDs are encouraged to register their interest to receive further information about the proposed class action through Omni Bridgeway’s website.
ABOUT PIPER ALDERMAN
Piper Alderman is a commercial law firm of 400 people in Adelaide, Brisbane, Melbourne, Perth and Sydney. The firm is committed to continual excellence in the practice of law, having been leading advisers to commercial interests across Australia for over 175 years. www.piperalderman.com.au
Martin del Gallego
Partner | +61 2 9253 9905
Senior Associate | +61 2 9253 9921
ABOUT OMNI BRIDGEWAYOmni Bridgeway is the global leader in financing and managing legal risks, with expertise in civil and common law legal and recovery systems, and with operations around the world. Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery. Since 1986, it has established a record of financing disputes and enforcement proceedings.