Piper Alderman and Omni Bridgeway commence class action for alleged victims of IG Markets CFD products
Piper Alderman and the world’s largest legal finance firm, Omni Bridgeway, have commenced a class action against IG Markets Limited on behalf of up to 20,000 everyday Australian investors who have collectively lost hundreds of millions of dollars trading controversial financial products called contracts for difference (CFDs). Following in-depth investigation spanning a number of months, the proceedings were commenced in the Victorian Registry of the Federal Court of Australia.
IG Markets Limited is a UK-backed financial services firm. The claim alleges that the company marketed and facilitated the trading of complex CFDs to inexperienced investors. It is alleged that IG Markets failed to adequately assess investors’ objectives, financial situations and inadequately disclosed the risks of CFDs until the Australian Securities and Investments Commission introduced strict new conditions on CFDs to protect inexperienced investors in March 2021. Those conditions followed a review by the regulator which found that 72 per cent of retail clients who traded CFDs lost money.
ASIC has also successfully brought proceedings against a number of CFD licensees operating in Australia in relation to historical conduct, with penalties awarded in excess of $75m.
CFDs have also 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 as “financial heroin hits” in the hands of unsophisticated retail investors.
ASIC data suggests that the total losses for retail investors with IG Markets is over $800 million.
Piper Alderman Partner, Kate Sambrook, said:
“There is 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. The class action seeks to provide a remedy and recover these losses for retail 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.
Hundreds of affected individuals have already registered for the class action. Individuals who have suffered losses through trading CFDs with IG Markets Limited are encouraged to register their interest to receive further information about the class action through Omni Bridgeway’s website.