How could my £10,000 vanish in commission?
The Readers’ Champion Probes a world of scams and scandals
P.H. writes: In 2017 I started to receive unsolicited phone calls from Gareth Hazelden of Atlantic Advisory Limited. He called seven or eight times, always polite, and explained that his company made money for clients by investing in stock market contracts for difference (CFDs). I agreed to invest £10,000 so he could open an account on my behalf with a separate firm CMC Markets. Atlantic then telephoned me almost every day, sometimes two or three times, recommending trades. Last July the calls stopped. I pressed Atlantic and was told there was only £390 left in my account. I expressed my shock and horror and then found that commission of £7,057 had been charged by Atlantic and a further £1,199 by CMC Markets. At no time did Atlantic advise me of my losses and its business terms say simply that CMC will collect unspecified charges and pass some on to Atlantic. I thought Atlantic would work to increase my capital but they appear simply to have used my trades to line their own pockets. CONTRACTS for difference are high risk. In effect, you bet that the price of shares or commodities will rise or fall within a certain time. You never own the shares or commodities and you only have to put down a modest percentage of the full value of the trade. This means your profits are magnified if you win, but your losses can wipe you out if prices move against your bet. CMC warns: ‘You could lose all your capital.’ With commendable honesty, it adds that 80 per cent of its retail investor accounts lose money on CFDs.
Atlantic Advisory, based in Truro, Cornwall, is more upbeat. It also warns that 80 per cent of CFD accounts are losers, but it dilutes this with a long list of what it says are advantages, including ‘the ability to buy or sell up to 20 times the value of your initial deposit’.
It even mentions ‘low dealing costs’ and tells investors: ‘We specialise in CFDs as we firmly believe they are the most innovative and versatile product available to investors today.’ I suspect the 80 per cent who lost might disagree.
You have told me that while you are prepared to take the losses ‘on the chin’, what sticks in your throat is that both firms – particularly Atlantic – have emerged with hefty commissions that add up to almost all your losses.
The whole scenario reminded me of the movie Trading Places, where two ageing Wall Street dealers from fictional firm Duke & Duke take on streetwise Eddie Murphy and explain how they get some clients to buy commodities such as orange juice or pork bellies, while other clients sell those same investments.
They tell him: ‘The good part is that no matter whether our clients make money or lose money, Duke & Duke get the commissions.’
In what is clearly a lightbulb moment for Eddie Murphy, who knows nothing about Wall Street, he replies: ‘Sounds to me like you guys are a couple of bookies.’
I do not think I could have put it better, so I invited the bookies – sorry, fully authorised investment firms – to comment.
Gareth Hazelden and his colleagues in Truro offered no comment or explanation, but did contact you directly. CMC told me: ‘We will respond in due course.’ But that response, when it came, was: ‘We do not wish to comment on this matter.’ But behind the scenes, I suspect the phones were red hot between CMC in London and Atlantic in Cornwall.
Both firms quickly contacted you to offer a settlement which came from Atlantic, but only on condition you signed a confidentiality agreement.
You have not told me how much you received, except to say that you are satisfied. You added: ‘I don’t think that the settlement would have been possible without your involvement.’
I hope CMC and Atlantic have learned from the experience. Nobody can object to anyone making an investment when they are fully informed of the risks and the charges. But to find that losses incurred are close to the dealing charges levied is adding insult to injury. If you believe you are the victim of financial wrongdoing, write to Tony Hetherington at Financial Mail, 2 Derry Street, London W8 5TS or email tony.hetherington@mailonsunday.co.uk. Because of the high volume of enquiries, personal replies cannot be given. Please send only copies of original documents, which we regret cannot be returned.