Class action commences against IG Markets

Piper Alderman and Omni Bridgeway have initiated class action proceedings against IG Markets on behalf of up to 20,000 Australian investors who have lost millions trading contracts for difference (CFDs).

The proceedings against UK-based IG Markets claim the firm “marketed and facilitated the trading” of complex CFD products to inexperienced investors; failed to “adequately assess investors’ objectives and financial situations” and did not adequately “disclose the risks of CFDs” until the Australian Securities and Investments Commission (ASIC) introduced new rules on the product in 2021.

The new conditions came after the regulator conducted a review which found 72 per cent of retail investors who traded CFDs lost money; its data also suggests that clients of IG markets have lost a total of $800 million. ASIC has also launched proceedings against several CFD licensees and has successfully seen penalties upwards of $75 million.

“There is evidence that highly-leverage CFDs should never have been marketed to everyday Australian investors who had little or no experience in trading such complex products,” Kate Sambrook, Piper Alderman Partner, said.

“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 allows investors to bet on the position of an asset such as a share, share price index, commodity, currency or cryptocurrency and whether it will decrease or increase in value by only paying a fraction of what the asset is worth. Investors can generate large amounts of profit, but their losses likely exceed the amount of the original investment.

The United States has already banned the trading of CFDs.