Options, futures, CFDs and other “incomprehensive” products

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Many companies are offered as intermediaries to invest in financial derivative products. Once reserved for large investors, today anyone can invest in options, futures or CFDs.

The operation is usually performed through sophisticated platforms that transmit orders to markets through the Internet with a speed and reliability unthinkable a few years ago.

Some of these complex products are particularly volatile, but allow large profits with small amounts of equity. This feature causes operations that can be very risky and overdrafts more frequent than desired when markets do not behave as expected.

Conflicts arising from these overdrafts sometimes cause major legal battles between the company acting as an online broker and his client, often a small investor protected by consumer protection rules.

For years I have acted as counsel for some of these large companies, drafting all standard contracts to be subject to the approval of the National Stock Exchange Commission (CNMV in Spanish), and I have also acted as attorney in multiple legal disputes with customers. This allows me perhaps to draw some conclusions that might be useful:

  • Many of these companies do not think about the judicial conflicts when drafting their contracts. They are rather concerned about passing the filter approval of the CNMV, so their contracts are often stereotyped models obtained as literal translations of Anglo-Saxon or contracts. This causes that a skilled lawyer defending an overdrawn client, can bring to serious trouble the company if he fully understands the functioning of these products and dominates the civil process.
  • Customer Relationship Services of these companies are highly specialized in the operation of the product, but they are almost never well advised by lawyers, so quite often, when resolving a complaint, they offer to the customers valuable weapons to be used against the same company in lawsuits.
  • Very often judges do not understand the functioning of these products and, as in other technical matters, experts can acquire a decisive importance. If we add that many of the experts do neither understand these complex products, but still act as experts without any remorse, a simple extract of movements can become the object of the craziest interpretations.

If you are trading business operating online, ask yourself if your standard contracts are adequate to deal with legal disputes and consider carefully the responses from your customer relationship service. I am sure your company is well equipped with a good system to prevent their overdrafts, so probably your losses will not be too high. However, think about what could happen to your business if one of those customers wins a lawsuit and you will be condemned to pay the procedural costs, the client gets rid of paying and then he decides to spreads the information across networks.

If you are a customer overdrawn, check with an expert lawyer your situation, a consultation costs little and to embarrass your opponent is easier than you think

Javier Martinez

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