When you deposit real money to a Forex broker’s account for trading purposes, you are putting your faith in their integrity. It is because of this that one of the most asked questions is, ‘How to choose a Forex broker?’. After being in the Forex trading industry for years, I’ve heard tales of terror on Forex broker review websites about traders who woke up to find their accounts stopped out when they had no trades before going to sleep. Or others who found a chunk of their capital withdrawn without their consent.
All this has happened, happens, and may happen to anyone in the future, including myself, which is why I sought to find out what recourse these faulted traders may have had. Granted, I was only looking out for my selfish interests when I first plowed through Forex regulations, but it hurts when I see another trader complain about being defrauded by their broker every other day. So, I put together 4 simple steps on how a trader who feels wronged can try and recover their hard-earned money:
1. Confirm any suspicions from your end
The first step is to confirm that you have been wronged by the broker, after all, you wouldn’t want to look like an ignorant fool. This means going through your account statements as far back as you can and checking every transaction on your account. It helps if you keep a physical ledger, but you don’t need to have one these days. All Forex trading platforms will have a ‘History’ section which shows all the transactions from your account. Most of them will also allow you to export the list of transactions to a webpage (HTML) or document (PDF) format.
Carefully go through all your transactions identify the ones you find suspicious and mark them. It might not be easy if you perform numerous transactions in a day, such as in the case of a scalper, but there’s a simple way to tell any suspicious transactions apart. Most traders will usually perform similar transactions, either in the time they hold the trade before closing or the size of the lot traded; a suspicious trade will quickly become obvious. Say, you never trade more than 0.5 lots, and you find one or more trades with 1 or more lots. You would remember if you made such a variation, but if you don’t, then highlight that particular trade.
At this stage, you’re simply preparing for the battle ahead, and Sun Tzu said “Every battle is won before it is even fought”. Any sign of ignorance on your part will lead to your complaint being quickly dismissed and only give the broker more ammo to attack you with. So, take your time and make sure you have an actual, verifiable complaint.
The ‘verifiable’ part is the most important, and this is what leads to many traders being defrauded by their brokers. For example, it is easy to verify that you didn’t withdraw or transfer some money from your account because your payment systems like Skrill, Neteller, or even a bank account statement can corroborate this by providing supportive documents. On the other hand, it is very difficult to prove that you didn’t authorize a particular trade because the markets are open 24 hours a day, and ‘I was asleep at the time!’ cannot be a valid reason. It’s best, therefore, to find some other form of verifiable proof.
2. Contact your brokerage firm
When you have your complaint prepared, contact your Forex brokerage firm on their website. The best Forex broker will have a ‘Live chat’ option through which you can contact one of their representatives at any time by sending instant messages. Be very precise about your complaint and provide any documents you have to support your claim.
Some of these ‘suspicious’ transactions are actual mistakes made by the broker’s system, and most Forex brokers will accept responsibility and make the necessary adjustments to your account. Things aren’t always so easy, though, and other brokers may have defrauded you knowingly. If you have the facts on your side, you will notice the representative faltering in their replies by maybe claiming you are either making it up, delaying their responses, or another kind of excuse.
Sure, even the ethical broker may require some time to confirm from their side that the documents you produced are authentic, but a fraudulent broker will become obvious by the length of their delays. Remember, these brokerage firms have entire teams of employees to check the information, and delays only show some reluctance on their part.
If your complaint has not been attended to in a few days, and you keep getting the run-around from the representatives on the live chat, kick it up a notch by calling them. Every broker’s website will have a ‘Contact Us page where they list the phone numbers and email addresses of their managers and compliance departments. Make the call and send that email, again with all the necessary documents you have, and if that doesn’t work, send them physical mail to their address. If the broker is located in the same geographical location you are, then march to their offices yourself, or visit a satellite branch of the firm. Keep a record of any physical correspondence you send and receive from the broker as this will be important if they still fail to correct their mistake.
3. Contact the broker’s financial regulator
Every Forex broker must be registered and licensed to operate by the region’s financial regulator. Part of the reason for this is to look into such complaints and determine who is at fault and then attempt to find a resolution between you and the broker. This process is known as arbitration.
The regulator will differ based on the location of the broker, and different regulatory bodies are in charge in different locations, for example:
- Australia - Australian Securities and Investments Commission (ASIC)
- Cyprus - Cyprus Securities and Exchange Commission (CySEC)
- Russia – Federal Commission of Securities Market of Russia (FFMS)
- South Africa - Financial Services Board (FSB)
- Switzerland - Swiss Financial Market Supervisory Authority (FINMA)
- UK - Financial Conduct Authority (FCA)
- US – US Securities and Exchange Commission (SEC)
If you’re not sure about your broker’s regulator, we have provided a quick link here.
You can contact the responsible financial regulator over the phone or through email, both of which will be found on their respective websites. Remember to send the documents that prove your case as well. After you do this, the outcome is out of your hands, and you will have to wait and see where the case leads.
You also have to be patient, since these arbitration processes tend to take a long time. The regulators do not have a direct stake in the case, and to them, it might not be a high priority, so they will take their time.
The most renowned Forex regulators are the FCA in the UK and the SEC in the US which have a history of being very ruthless with unscrupulous brokers. For the security of your money, check out our FCA-regulated Forex brokers list for some of the most reputable brokers in the world.
4. Consult a lawyer
For a small account holder, this might not be prudent since the lawyer might cost more than your entire trading capital. However, if you have been defrauded of a huge amount of money, then getting advice from a lawyer specializing in securities may be your best course of action. Not only will they provide guidance, but they might even speed up the arbitration process and land you a settlement quickly.
What you can expect to get
Unfortunately, Forex regulators do not require that the broker offer any compensation in all cases. However, if you manage to prove damages, then you might be eligible for compensation, on top of the restoration of your account balance. The brokers know this is a possibility, and they will often restore your account as soon as they realize you are onto them and have the documents to prove this. As a trader, you are likely to accept this resolution and move on, and only the most brazen traders will take their complaints to the very end.
The fact is, it all comes down to what you want – your money back or to punish the broker. If you intend to punish the broker, then you must be prepared for a long battle. Most Forex brokers are huge companies with plenty of capital to hire the best lawyers to clog up the legal system and drag the case for years in court. Believe me, you don’t want to be in a battle with them; take your money, any compensation provided, and run without looking back – you got what you wanted.
If you want to know just how difficult it is to get your money back or even be compensated, just look at some of the most high-profile cases of fraud like the Bernie Madoff scandal. To this day, investors in his company have still not been fully compensated or reimbursed for their investments.
In short, if you’re dealing with a dishonest broker, then, chances are you are going to be screwed even if you have all the facts on your side. Still, it never hurts to put up a fight, and sometimes you must make some noise to be heard.
Prevention is better than arbitration
It’s much easier to prevent such cases than to fight them, which is why choosing a Forex broker is perhaps the most important step to becoming a successful trader. If you have the right broker on your side, then you can be more confident your money is safe in their hands.
To see how forex regulators help clients complain against their broker, watch this video: