Forex Derivatives Mis-selling
We are a leading City of London law firm with the perfect skill set to act for businesses seeking to resolve FX mis-selling by banks or brokers. We provide the very best forex derivatives mis-selling representation and use our banking and financial services litigation expertise to ensure we obtain the best possible results and compensation for our clients.
We advise and represent importers/exporters and other companies that are considering litigation claims against financial services institutions over toxic foreign exchange transactions and derivatives and on mis-sold and counterproductive and/or speculative hedging strategies that increased not minimised currency risk.
Our lawyers are regularly interviewed by journalists and broadcasters and featured in the media commenting on derivatives mis-selling. See our Media Appearances section below.
On 16 October 2013, the Financial Conduct Authority (“FCA”) made an announcement that it is “conducting investigations alongside several other agencies into a number of firms relating to trading on the foreign exchange market”.
In addition, the FCA announced on 12 November 2014 that an industry-wide remediation programme was commissioned which will require “firms to review … their spot FX business to ensure that they are of a sufficiently high standard.”
The FCA has imposed its largest ever fines totalling over £1.1 billion ($1.7 billion) on five banks (Citibank, HSBC, JPMorgan Chase, Royal Bank of Scotland and UBS, with a separate probe into Barclays Bank) for failing to control business practices.
The Foreign Exchange Market (Forex, FX, or Currency Market)
The spot FX market is a wholesale financial market and spot FX benchmarks (also known as “fixes”) and, in terms of volume one of the world’s largest markets. It is a market that is used to establish and speculate on the relative value of two currencies i.e. a currency pair (this includes some of the worlds most traded currencies (known as ‘G10 currencies’) such as US Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP) and Swiss Franc (CHF)).
In particular, the foreign exchange market facilitates international trade and investments by allowing businesses to convert their currency, thus allowing these businesses to import goods using a foreign currency, even though their income is received in their primary currency. However, many international businesses that speculate on the relative value of two currencies often seek to protect themselves from currency fluctuations, which can have serious implications for their business, using extremely complex hedging arrangements with banks and financial institutions. These are highly sophisticated and complex financial instruments that only experts with access to market data and appropriate training and experience can truly understand, price and analyse, and products most businesses were (and are) not equipped to understand.
There are several financial instruments which banks and financial institutions have advised would offer clients protection against market fluctuations without adequately explaining the associated risks of these products. In light of recent market volatility, this has left many of the businesses that entered in to these complex financial instruments with huge liabilities and questioning whether they have been mis-sold instruments which they were not equipped to understand. Examples of such financial instruments include:
- Forwards; and
The FCA’s findings on FX Trading
The FCA commenced its investigations into FX market in October 2013 and, it found that in the period between January 2008 and October 2013, many banks and financial institutions did not exercise adequate and effective control over their G10 spot FX trading businesses including insufficient training and supervision into the behaviours of the FX traders.
When selling complex financial instruments, or products, there is a duty of care on behalf of the seller which is heightened by reference to the type or class of customer. The banks may also have made misrepresentations as to nature of the hedging and the contingent liabilities attached to the FX hedging contract(s). The duty of care itself exists in both common law and statutory law. The level of the duty of care can be expressed by reference to the Conduct of Business Sourcebook (COBS) rules. The FCA requires sellers, in this case banks, to provide a full explanation of the effects of the products and the potential and associated risks. Sellers are also required to make sure these products are suitable for the client. The banks are obliged to follow these principles and rules which are set out in the FSA’s COBS rules. In many of these sales the banks breached this duty of care by: (i) not explaining to their customers the possible detrimental effects of FX hedging and the associated risks together with (ii) failing to consider that an FX hedge may well not be the most suitable product for their client.
Furthermore, during the FCA’s 13-month investigation found that traders shared client information that they had been trusted to keep confidential to help them work out their trading strategies in order to generate large profits for the banks. This was carried out by traders who manipulated fix rates and trigger client “stop loss” orders, which are designed to limit the losses a client could face if exposed to adverse currency rate movements. This meant that these traders would ensure that the rate at which the bank had agreed to sell a particular currency to its clients was higher than the average rate it had bought that currency for in the market, and if successful would generate huge immediate profits for banks and disadvantage those clients and the market.
Mis-sold FX Hedge: Resolving FX Hedge Mis-selling
If you have been mis-sold an FX hedge there a number of possible solutions. These include:
- complaining to the bank or financial institution
- attempting to negotiate with the bank or financial institution
- complaining to the Financial Ombudsman Service (FOS)
- letter before action, issuing proceedings and litigating against the bank via a specialist derivatives mis-selling solicitor
The initial step may be to attempt to negotiate with the bank and to seek to reach an agreement although this is often very difficult to achieve without threatening and/or commencing legal action. Pre-action advice, information gathering and correspondence is managed by our specialist solicitors who consider the facts of your case, the circumstances the hedging was sold in and the bank’s position. We then prepare a detailed pre-action letter of claim to start off the negotiations. If negotiation is not possible to resolve a mis-sold hedge then litigation will be considered. In the best outcome the contract can be rescinded which means that parties will be put in their original positions before they entered the contract i.e. before they were sold the FX hedge. Our expert lawyers can help we will assess your case and position and using their specialist knowledge and experience will strategise the best to way to commence proceedings against the bank. Another consideration is complaining to the Financial Ombudsman Service, via which process it may be possible to obtain compensation of up to £150,000 (for complaints made after 1 January 2012). Our specialist lawyers have experience dealing with the FOS and can assist clients as to the FOS’ rules and procedures. Where appropriate we can assist in making formal fully prepared and well presented complaints on clients’ behalf and can advise if litigation is a better option for redress, which in these cases it often is.
Why use a Specialist FX Mis-selling Solicitor?
Derivatives are a complex subject matter which most generalist lawyers simply would not be familiar with or understand to a level adequate enough to be able to recognise and formulate a mis-selling claim. Our specialist lawyers are degree level educated in banking and securities law and have professional experience in both financial services regulatory auditing and in litigation against banks. This experience has been gained not only at other leading city law firms but at the legal and compliance departments of the banks themselves. Our team will ensure your FX hedge mis-selling claim achieves the best possible result in terms of putting you back in the position your business would have been in but for the FX hedge.
We work to achieve our client’s interests by attempting to negotiate with the banks wherever proper and commercially sensible to do so. When the time comes to issue legal proceedings we know how best to do so. If a without prejudice settlement approach is unsuccessful we seek on behalf of our client both litigation funding and after the event insurance policies and prepare and issue a claim without delay. Members of our legal team are also insolvency and winding up petition experts so if our clients face winding up proceedings or appointment of receivers as a result of a mis-sold interest rate swap we can quickly assist and advise in these areas.
Our FX Hedge Lawyers get the best results
We endeavour to make the process as stress-free as possible for our clients and seek to eliminate the possibility of business or litigation failure. We know that each client’s case and business is unique, therefore we adopt a bespoke approach tailored to suit the client’s circumstances. We provide specialist senior legal advice from solicitors and barristers (including at QC level) at the outset when it absolutely matters in choosing the best strategy to follow. We are regularly instructed by regional solicitors’ firms to give specialist litigation advice and support in swaps mis-selling cases. We assist by:
- Issuing legal proceedings & drafting documents/pleadings to support the mis-selling claim;
- Assisting you in preparation of evidence to support your mis-sold FX hedge case;
- Appointing the right derivatives and hedging experts to ensure the best chance of success in litigation;
- Appointing forensic accountants to assess and report on the refunds and consequential losses due;
- Liaising with the bank’s (their solicitors), the Court and/or the Financial Ombudsmen Service;
- Providing first class Court representation and advocacy; and
- Developing (and aiding implementation of) strategies that allow the business to continue to trade successfully.
Please note: Claims Management Companies are regulated by the Ministry of Justice and are not law firms made up of solicitors and barristers. In these cases, they can only complain to the FOS. They cannot issue legal claims nor represent their clients at Court and may lack expertise in this area. You do not need a CMC to assist you and typically they will simply refer your case to a lawyer for a fee (from the lawyer). We do not accept referrals from CMCs.
Business rescue and Insolvency advice
As well as Forex mis-selling claims, our lawyers specialise in Litigation, Interest Rate Swaps, Winding-up and Insolvency work and as a consequence we are able to add value to our legal services by guiding clients in these areas which are often ancillary to the FX mis-selling litigation.
We can and have helped clients successfully defend winding up petitions brought by financial services institutions and we can challenge the appointments of LPA Receivers and Auctioneers and also advise as to how best businesses can be rescued and turned around and how debts can be written off or restructured.
If your business has already suffered terminal loss due to (either in full or part) a hedging product from your Bank we can still provide advice on how best to proceed. For example on obtaining an assignment of the right to bring legal proceedings against the financial services instituion from the Administrator or the Trustee in Bankruptcy as appropriate and have experience in doing so.
Call us on ☎ 02071830529 or email us on for more information about the legal services we provide. Our team of London lawyers are based in Middle Temple adjacent to the Royal Courts of Justice. We are committed to providing professional and specialist legal advice.