Online Share Dealing Currency Error Help !

monkeyg1

Greetings to all,
I hope some of you can offer some advice or comments on my issue below.
As a casual online trader, i recently made a trade on some currency via one of large UK banks and as it turns out at that particular moment the currency value was very much in my favour, which in turn provided an almost seven fold increase in the value of my trade. The trade was sold and executed. So with a very large pot showing in my account, i get a call from the bank saying that there had been a human error with the currency rate applied (it lasted about an hour i think) and that they were resetting the trade that i had made to the correct value resulting in pot value being greatly reduced. Where do i stand on this ? Are they allowed to go into my account and change my account value without telling me (they phoned me afterwards) ? Are they allowed to reverse a legal trade that had been fully executed just becuase they made a human error on their side ? And to top it all my account is now frozen and i cannot access it for no apparent reason ? Any help/comments would be most welcome.
Regards,
Monkeyg1

Reaper

This one is not as straight forward as the usual "bank error in your favour" cases.

On the face of it if the bank made an offer on your shares which you accepted and therefore a contract had been made which I would not have thought they can get out of. Certainly if you tried to back out of it at that point they would not have allowed you to.

However it is entirely possible they have made provision for this in their Terms & Conditions which you ought to check.

Alternatively was the trade itself priced correctly in the local currency and it was just when subsequently converting the cash generated from dollars to sterling that the mistake was made? If so you might not have a case.

EDIT: From the title I thought you were trading foreign shares but your post seems to suggest you were trading in currency (FOREX). Which is it?

Reaper

Not quite the same but there was an interesting £123 million error made on the Tokyo stock exchange when a trader tried to sell 1 share for 600,000 yen, but accidentally sold 600,000 shares for 1 yen. Embarrassingly that was more shares than the company had even issued.
http://www.timesonline.co.uk/tol/news/world/asia/article755598.ece

In the end the stock exchange was made to pay compensation because frantic attempts to stop the trade failed.
http://news.bbc.co.uk/1/hi/business/8394814.stm

pigsy_2

Hello, I too experienced the same problem with a large bank, I bought an ETF in one currency then sold it into my Euro account, the bank had made an error and the rate was in my favor 10 fold as they had the decimal point in the wrong place.

Later on that day when the Euro rate was corrected I bought 10 times as much ETF as I could previously that morning and subsequently sold in into my Sterling account. I now had 10 times more money than when I started that day.

The next day, I got a call from the bank saying it was a human error and that they would be reversing the trades.

How can they do this?

I acted in good faith and took the risk with my own capital.

On any other day had I bought more shares than I had meant to buy, do you think they would let me reverse my mistake? I think not.

Surely thay cannot freeze my account and reverse all my trades.

I have yet to receive anything official from the bank, I am not even sure that this has been escalated within the banks heirarchy, why else would someone call me at work and say that he will be correcting my trades?

Help and advice from anyone would be most welcome.

:mad:

Reaper

Both of you have failed to state which bank you are talking about. However as I said before you need to check your T&C with whoever it is.

To pick one example - Tradefair spread betting:

When placing a bet via the Online Trading Platform your confirmation will be via an e-mail contract note. The contract is binding on both parties except for instances of “Pricing Error”

If you have something like that in your T&C they may be able to reverse it (though note that just because things are in your T&C does not necessarily make them legally enforceable)

I have only studied a little contract law many years ago so take the following as pointers rather than answers.

On the plus side it would apear a contract was made at an agreed price and you took risk on that basis.

On the negative side in the case of online goods being mis-priced I heard the law would not enforce the contract if it is an obvious pricing error (thoiugh I have not been able to confirm that), and I imagine the same applies here. So if you knowingly took advantage of an error (and I suspect you did if the amount was out by a factor of 10) then it does not look so good for you.

Finally the phone call to you was likely recorded. Did you verbally agree to the correction? If so it's game over.

pigsy_2

Sorry Reaper, It is HSBC.

Reaper

You need to look at the T&C or prospectus of your particular investment. I did a quick search and found this HSBC prospectus (which may not be for your product) which says on the subject of valuations:

Notwithstanding the above provisions the Directors may, with the approval of the Custodian (a) adjust the valuation of any listed investment where such adjustment is considered necessary to reflect the fair value in the context of currency, marketability, dealing costs and/or such other considerations which are deemed relevant; or (b) in relation to a specific asset permit an alternative method of valuation approved by the Custodian to be used if they deem it necessary.

Where "Custodian" in this case is HSBC Institutional Trust Services (Ireland) Limited.

There is also a lot of stuff in there to do with them not being liable for any losses due to pricing errors, though they have little to say on the subject of profits.

Check your T&C and if you want to take it further you will have to speak to a solicitor to see if you have a case. You are unlikely to get a definitive answer here.

monkeyg1

Thanks for your replies Reaper. My scenario mirrors that of pigsy's and what a coincidence, it is with the same bank.

pigsy_2

Thanks Reaper, I appreciate your input. Looks as though I have a real fight on my hands, to get to keep my profit.

I'll post my progress on this matter over the coming days and weeks.

Biggles

pigsy wrote: »

Thanks Reaper, I appreciate your input. Looks as though I have a real fight on my hands, to get to keep my profit.

Well, it is theirs really, not yours, isn't it? It's a bit like the 'bank made an error in my favour, can I keep it?' posts. And they always know that the answer is 'No, of course not!'.

All spread firms & brokers have a clause enabling them to correct blatant pricing errors, as per the examples quoted above.

But you shouldn't be worse off than if you hadn't taken the trade.

ozzage

I'm not a fan of trying to take advantage of honest mistakes, to be honest.