Restriction Placed on Account - Legal

[PJGTR19]

Hi all,

Please read this and give any advice, statements, or questions. I appreciate the effort ahead of time for reading this lengthy post.

Here's the situation.

Recently, I had initiated a transfer request of equity positions from one broker-dealer to another due to a compliance reason at work. I also held a "sub-account" within the brokerage account that was to be transferred that held open FX Positions open. My compliance department does not require me to transfer the currency account/positions. However, I was re-assured several times by both ends of the transfer (both broker dealers, distributing and accepting ends) that the FX account would not be affected at all by the transfer. Please keep this fact in mind and keep reading.

Long story short, I was told by my compliance department that I wouldn't have to transfer the entire account, I would just have to liquidate the equity positions (since I explained I loved this particular broker dealer's trading platform and if I didn't have to close the account, I wouldn't want to.) So I chose to simply cancel the transfer request, and when the cancellation went through, I would liquidate the equity positions, and keep the account open simply for the trading platform to trade FX pairs.

I called both sides of the transfer (meaning both broker dealers) and each one stated that only the other had the power to cancel my transfer request. While this was going on, the distributing broker dealer placed a trading restriction on my account. I was unable to open or close positions in BOTH THE EQUITY ACCOUNT AND FX ACCOUNT.

I called the distributing broker dealer that had placed the restriction and they stated they could not lift the restriction until the transfer is cancelled. I explained to them that I was told that my FX account would not be affected by the transfer at all. They assured me that they would lift the restriction partially and allow me to only input closing orders in order to protect liquidity. That never happened.

I called back a day later and stated that I'm still unable to close any orders. They stated it's out of their hands and is now the responsibility of the accepting Broker-dealer to cancel the transfer request, send the distributing broker dealer a "cancelled/rejected status" so that the restriction may be lifted and I am free to trade.

I had very, very profitable positions in my FX account. I did not close these positions prior to requesting the transfer because I was told the FX account would not be affected. Being a trader, I let the profitable trades run and did not close them out since I was assured of the fact above. It's been a few days and those still open, once very profitable positions have dwindled down to nothing and, should they continue to move against me, will compromise the liquidity in the FX account.

I called back, very calmly and asked them a simple question. Despite me being told by several people on both ends of the transfer that the FX account would not be affected, and despite me being told by someone they would allow me to close my open orders to prevent the exact situation I'm in and after days of going back and forth with multiple people, am I still personally liable for the compromise in liquidity because someone gave me the wrong information? And despite this wrong information leading me to not close my very profitable positions in the first place, is it still my responsibility for my losses? They stated yes. I asked them how I'm supposed to avoid the compromise in liquidity if my account has a restriction placed on it? They didn't have an answer. They literally stayed silent.

I'm wondering if I have a case here for damages of some sort. There's clearly negligence on both ends of the transfer, both broker dealers. They each stated that the FX account would not be affected and therefore, I did not close my profitable positions; I let my profitable trades gain more profit. When I wanted to close the positions, a restriction was put on my account prohibiting me from closing my positions and I was forced to watch my account dwindle down to nothing and have my liquidity compromised. Do I have a case for damages of any sort for negligence? Either damages related to what I lost or more than that for all of the trouble I've been put through?

Thank you.

Best regards,

PJGTR19

 

[Sig]

Hi all,

Please read this and give any advice, statements, or questions. I appreciate the effort ahead of time for reading this lengthy post.

Here's the situation.

Recently, I had initiated a transfer request of equity positions from one broker-dealer to another due to a compliance reason at work. I also held a "sub-account" within the brokerage account that was to be transferred that held open FX Positions open. My compliance department does not require me to transfer the currency account/positions. However, I was re-assured several times by both ends of the transfer (both broker dealers, distributing and accepting ends) that the FX account would not be affected at all by the transfer. Please keep this fact in mind and keep reading.

Long story short, I was told by my compliance department that I wouldn't have to transfer the entire account, I would just have to liquidate the equity positions (since I explained I loved this particular broker dealer's trading platform and if I didn't have to close the account, I wouldn't want to.) So I chose to simply cancel the transfer request, and when the cancellation went through, I would liquidate the equity positions, and keep the account open simply for the trading platform to trade FX pairs.

I called both sides of the transfer (meaning both broker dealers) and each one stated that only the other had the power to cancel my transfer request. While this was going on, the distributing broker dealer placed a trading restriction on my account. I was unable to open or close positions in BOTH THE EQUITY ACCOUNT AND FX ACCOUNT.

I called the distributing broker dealer that had placed the restriction and they stated they could not lift the restriction until the transfer is cancelled. I explained to them that I was told that my FX account would not be affected by the transfer at all. They assured me that they would lift the restriction partially and allow me to only input closing orders in order to protect liquidity. That never happened.

I called back a day later and stated that I'm still unable to close any orders. They stated it's out of their hands and is now the responsibility of the accepting Broker-dealer to cancel the transfer request, send the distributing broker dealer a "cancelled/rejected status" so that the restriction may be lifted and I am free to trade.

I had very, very profitable positions in my FX account. I did not close these positions prior to requesting the transfer because I was told the FX account would not be affected. Being a trader, I let the profitable trades run and did not close them out since I was assured of the fact above. It's been a few days and those still open, once very profitable positions have dwindled down to nothing and, should they continue to move against me, will compromise the liquidity in the FX account.

I called back, very calmly and asked them a simple question. Despite me being told by several people on both ends of the transfer that the FX account would not be affected, and despite me being told by someone they would allow me to close my open orders to prevent the exact situation I'm in and after days of going back and forth with multiple people, am I still personally liable for the compromise in liquidity because someone gave me the wrong information? And despite this wrong information leading me to not close my very profitable positions in the first place, is it still my responsibility for my losses? They stated yes. I asked them how I'm supposed to avoid the compromise in liquidity if my account has a restriction placed on it? They didn't have an answer. They literally stayed silent.

I'm wondering if I have a case here for damages of some sort. There's clearly negligence on both ends of the transfer, both broker dealers. They each stated that the FX account would not be affected and therefore, I did not close my profitable positions; I let my profitable trades gain more profit. When I wanted to close the positions, a restriction was put on my account prohibiting me from closing my positions and I was forced to watch my account dwindle down to nothing and have my liquidity compromised. Do I have a case for damages of any sort for negligence? Either damages related to what I lost or more than that for all of the trouble I've been put through?

Thank you.

Best regards,

PJGTR19

I feel bad for what happened to you, it clearly sucked. However I wouldn't recommend a lawsuit unless you lost several hundred thousand or more. Here's why: every broker has something in their terms and conditions that says they're not liable for losses you suffer because you're not able to trade with them. It sounds like you're in the finance industry (based on the reason for moving the account in the first place) so you can probably understand why. You essentially would be getting a free put option if you were able to sue them when your forex position went south. You could have opened up an account in 5 minutes with any of dozens of forex brokers and opened an offsetting position, maybe you could even have done this with futures, options, or ETFs at the receiving broker since it doesn't sound like your account with them was locked. In this case you would incur the extra commission, which they'd probably reimburse you for if you asked nicely and if you really wanted to you could sue for that and probably win. Instead you kept it open, granted with them stringing you along, and by doing so essentially put them on the hook for almost unlimited liability for the position itself. It's also telling that if the position had become more profitable while frozen, you wouldn't have paid them the difference, right?
So, if your brokers don't have such a clause, you may be successful in a suit but may not because they can paint the picture I just painted. There are very few successful cases where funds were recovered in this kind of scenario where the broker wasn't committing outright fraud or doing something like front running, where as in this case it just sounds like incompetence. Even if you do have a 25% chance of success, is it worth spending $50K on a decent attorney to get a 25% chance at recovering $10K? Once your transfer goes through get your karma fix by letting everyone know who it was (although if it was IB you almost deserved it because we've all published so much on how incompetent they are already).

 

[newwurldmn]

if the numbers are big enough you, might be able to take it up with finra. no attorney's there I think

 

[J.P.]

Once your transfer goes through get your karma fix by letting everyone know who it was (although if it was IB you almost deserved it because we've all published so much on how incompetent they are already).

Yes, @PJGTR19, please do.