Forex (FX) Derivatives Mis-selling Claims

Our market leading team of specialist financial disputes lawyers are advising clients in relation to claims against banks and brokers resulting from mis-selling of Foreign Exchange (FX or Forex) derivatives, generally arising from failed currency hedging strategies. The Brexit fallout has brought significant volatility to forex markets, affecting sterling, euro, dollar and other major currencies. Businesses hedging their currency risks remain exposed to this volatility, and many have suffered significant losses as a result of the extreme FX rate movements. Our expert lawyers can assist businesses who have been sold highly-leveraged complex FX derivatives products and we have extensive experience in bringing claims and court litigation against banks.

Many businesses have been sold complex FX derivatives as an alternative to conventional hedging strategies that would ordinarily involve the use of futures contracts. Instead, mis-sold derivatives often retain specific one-sided features that are weighted in the bank’s favour. For example, trades might be ‘knocked out’ at defined targets when in the money – which may then defeat the objective of hedging currency risk altogether. Equally, businesses can find themselves stuck with unlimited exposure to downside risk, or find themselves locked in for extended periods with significant break costs. A common feature is that if exchange rates fall outside a specific range, customers are obliged to purchase increasing amounts of currency and at uncommercial exchange rates.

Businesses are often unaware of these features until the significant losses materialise, and were sold these FX derivatives without adequate (or in some cases any) explanation of these features, their risks and the significant potential financial consequences.

Banks that sold these complex FX products are often unilaterally responsible for calculation of their ongoing valuation, close out values – and resulting customer losses. The banks’ processes will require careful scrutiny and can be open to question. This is an increasing concern where the continued Brexit-fueled fall in sterling requires customers to post additional collateral in order to avoid being closed out and crystallising significant losses.