Broker does not pay out – what to do?
Broker does not pay out – this is a situation investors want to avoid at all costs. However, private investors who want to trade in financial products need a broker for settlement.
However, the choice of brokers is so large that it is difficult to find the right one. Moreover, there are online brokers who, in the worst case, are scammers and refuse to pay investors the money they are entitled to.
Interested investors should therefore inform themselves thoroughly before choosing a broker in order to avoid any nasty surprises from the outset. This article is intended to give an overview of the activities of a broker and to show what legal options an investor has if the broker does not pay.
Topics in our legal advice
Table of contents
- Broker does not pay out? Online Broker Experiences
- Which brokers are reputable?
- How do brokers get paid? Fees for online trading
- What to do if the broker does not pay out?
- Online Broker Comparison: Registered Office and Regulated vs. Unregulated Brokers
- What to do about broker fraud?
- Recognising dubious brokers in advance – tips
- Broker fraud: Help for victims
- Broker fraud – not an isolated phenomenon
- The broker is based abroad – what are the chances?
- Broker warning: Follow the BaFin’s advice
- Trading money back
Broker does not pay out? Online Broker Experience
When investors place securities orders on the internet, they are executed by a financial services provider known as an “online broker”. In doing so, the broker trades a variety of financial instruments such as currency pairs on behalf of the client: Forex Trading, Contracts for Difference: CFD Trading or cryptocurrencies in Crypto Trading.
The broker is not only active on a single trading venue. Rather, it trades both on the various exchanges and on over-the-counter trading venues.
For its services, the online broker is remunerated via a brokerage fee, i.e. it receives a percentage amount for each transaction processed through it.
Which brokers are reputable?
Whether a broker pays his clients the money they are entitled to or whether he refuses to make payments usually depends on one simple factor. Either it is reputable or it is not.
However, choosing an individual broker is not always easy. Therefore, as an interested investor, you should do your homework and find out which broker best suits your needs.
When choosing a broker, a variety of factors should be considered, with customer service being the most important argument for many investors. Therefore, before choosing a broker, investors should consider what is most important to them and what kind of service they expect from their new broker.
Although online traders are legally entitled to access their deposit and any surpluses generated, in practice problems unfortunately occur time and again.
How do brokers get paid? Fees for online trading
In Germany, investors attach great importance to security and transparency. Therefore, it is particularly important for many investors to know the fees of their broker. Brokers’ fees vary, just like the different products on the market.
Directly traded shares, for example, have a different fee structure than shares traded as CFDs. Brokerage fees can be a one-time commission or a mark-up on the spread between the bid and ask price (“spread”).
The latter is more common. Investors should compare the fees charged by different brokers online.
Private investors who buy and sell a lot of securities should also check whether their broker charges a small commission for each purchase and sale. Day traders, for example, are heavily dependent on order fees, while position traders are heavily dependent on financing costs.
What is high-frequency trading?
High-frequency trading currently dominates the stock exchanges, where algorithms transmit buy and sell orders at very high speed. Private investors are equally interested in being able to place their buy and sell orders as quickly as possible.
Therefore, the accessibility of the broker is crucial, especially for investors who want to react quickly to changes on the stock exchange. The broker should therefore be available at all times, not only during trading hours. In addition, the investor should know how to reach the broker, because there are often several ways to contact them.
For example, with some brokers it is only possible to place orders by telephone. It should also be noted that not all brokers based in Germany offer their services in German.
Since not all companies offer the same services to their clients, brokers with a wide range of products are especially interesting for investors who trade in different assets such as ETFs, shares and Forex.
It is also advisable to study other people’s experiences in advance to see how the broker’s payment behaviour actually stands.
Broker does not pay out what to do?
If a broker does not comply with a payment request from his customer, the investor is very annoyed. Unfortunately, it is often only at this point that one finds out whether one is dealing with a reputable provider or whether the broker is to be classified as dubious and it may even be a case of investment fraud.
There are numerous problems that can occur during the payout that go beyond a short payment or a refusal to pay. For example, there can be a significant delay in the payout, and bad exchange rates are not isolated cases either.
Since the CFD brokerage market in particular is a haven for shady characters, investors who lose their money here are unfortunately not uncommon. Speculative derivatives such as CFDs (Contracts for Difference) offer greater opportunities for profit, but investors must also accept greater risks.
CFDs are speculative investments because they enable investors to open large trading positions on the market with a small amount of money. In contrast to shares, the buyer of a CFD is merely the holder of a claim and not a shareholder in a company.
Those who are affected by the broker not paying out have a few options. The company’s registered office and the broker’s authorisation status are important factors to consider.
Online Broker Comparison – Registered Office
In principle, investors are free to choose any broker, regardless of where it is based. However, if the broker does not make payouts and has its registered office outside Germany, this can lead to problems.
In fact, many brokers are based in other countries, for example those with low corporate taxes.
For example, Cyprus is popular with online brokers because it charges low corporate taxes and is a member of the European Union, so brokers can offer their services throughout the EU.
In the event of insolvency, brokers based in the EU are required to hold all client funds separately from business assets in a trust account so that they do not become part of the insolvency estate. Customers’ accounts are also protected by a guarantee of up to 100,000 euros.
How do regulated and unregulated brokers differ?
Even though the regulation of a broker is a good indicator of the seriousness of a company, this does not mean that brokers from other EU countries that are not regulated are automatically suspect.
It is a solvable but also challenging task to take legal action against a broker based outside the EU that does not pay out the investor’s money.
Therefore, investors should exercise extreme caution when dealing with unlicensed brokers and research thoroughly before doing business with them.
Brokers that are licensed are considered trustworthy and reputable; they stand for trustworthiness and honesty. For clients of licensed brokers, the most important thing is that they have a contact person to whom they can turn with their questions or concerns.
The duties of a regulated broker include the following:
- Participation in the compensation fund or deposit insurance,
- refraining from unfair advertising,
- verification of the client when opening an account,
- qualified customer service,
- Exchange with regulatory authorities,
- Separation of client funds from own assets through separate accounts.
In contrast, unregulated brokers are not obliged to do anything. Trading with an untrustworthy broker accordingly entails a significantly higher risk than trading via a reputable broker.
Online brokers who are not regulated do not have to answer to a higher authority and can conduct their business as they see fit.
Broker fraud what to do?
There are more and more dubious online brokers who exploit the growing binary options market by defrauding investors and, in the worst case, not paying out any money at all. To crack down on dodgy brokers, stricter licensing requirements are being introduced by European financial regulators.
In addition, financial regulators such as FINMA publish and update lists of questionable brokers who offer their services despite not having a licence. However, despite the efforts of the European authorities, the market continues to be plagued by questionable brokers.
Customers who have suffered losses through such online brokers, whether through non-payment of money or otherwise, should always check or have checked what legal measures they can take.
Broker does not pay out: How can you recognise dubious brokers in advance?
Online brokers with questionable business practices can be recognised in various ways. A first indication is, of course, if a payout is delayed or does not occur at all.
In addition, unsolicited calls, also called “cold calls”, are a warning sign of a shady broker. This is a type of canvassing with the aim of gaining investors as clients of foreign brokers without a licence through such contact.
After the fraudsters have succeeded in turning those called into clients, they use various tricks to defraud them. Affected investors often report that there are suddenly problems in contacting them after the money has flowed.
Moreover, investors are lured into trading large sums by generous bonuses, which are mostly offered by brokers of so-called binary options. But these freebies often come with a long list of conditions.
There have been cases, among others, where traders had to trade 40 times the bonus amount to receive their bonus money.
Investors should be extremely wary of such withdrawal conditions and avoid the broker in question if possible. Moreover, there are brokers that disappear from the scene as soon as investors demand their money back. At the latest when the money is not paid out, the broker becomes a fraud.
Broker does not pay out: Here are some simple rules to avoid fraud
Broker does not pay out: A situation investors want to avoid at all costs.
Here are some practical recommendations for action:
- Don’t believe empty promises.
- Do not install any programs until you are absolutely sure they are harmless to your computer.
- Beware of software that claims to contain the secret recipe for success.
Other points that indicate a high risk:
- There are obvious spelling errors on the website.
- Commitment to profit, there is no balance between the presentation of the chance of profit and the risk of loss.
- “Auto trading”, “robots” and “arbitrage” are terms that should be viewed with some scepticism.
Identify fraudulent brokers and protect yourself.
In any case, check the following:
- Is there a complete imprint on the website?
- Who is your contact person?
- Where is the company’s head office?
- Do not accept unsolicited advice (telephone solicitation, e-mail) regarding investment opportunities.
- Make an effort to thoroughly understand the provider and their services.
- Do not allow anyone to access your terminal via remote maintenance software.
- Beware of identity theft: Do not send copies of your identification documents. Such requests are very common with these scams.
- Is the company listed in the company database of the supervisory authorities in the EU member states or in the company database of the Federal Finance Agency?
Never follow empty promises that include unrealistic profits, as they usually avoid serious transactions. One of the most important aspects of avoiding fraud is to think like a businessman and recognise all potential pitfalls in advance.
Do not make decisions under pressure, be sure to weigh all the pros and cons of potential transactions in advance.
Broker fraud: Help for aggrieved parties
Anyone trading CFDs must pay close attention to the bonuses and benefits offered by brokers. Here, dubious brokers use fraudulent tactics to make it difficult for traders to withdraw their funds.
For example, a certain trading volume may be required before the investor’s funds are released. With unregulated brokers, one of the biggest problems is that they refuse to withdraw even if the client has met all the criteria for a withdrawal.
In this case, it cannot be ruled out that it is a criminal case of fraud. In fact, a case of fraud only exists if the broker wants to refuse the payout even though the investor is entitled to it.
In this case, you have the option of filing a criminal complaint against the broker in question. However, it is difficult to take legal action against a non-paying broker that is not regulated and has its registered office outside the EU.
Problems with broker during payout not an isolated phenomenon
That requested payments are not made by the broker is a common phenomenon. But brokers who try to obtain customer data by creating fictitious websites also commit fraud.
Aggrieved parties can also take civil action against a broker if it fails to meet its payment obligation. When a broker fails to make a payment, the first thing the injured party wonders is how to get their money back. Investors who are wrongfully denied a payout by the broker are entitled to damages.
However, it is difficult for an investor who has lost money through an unauthorised broker to get the investment back. This is because many brokers are often subordinate to large companies, making it difficult to see the exact structure of the organisation.
In addition, the headquarters of fraudulent brokers are usually located in tax havens outside the EU, which makes it difficult to take civil action if a payout is missed.
Fraudulent online brokers and online trading
There are many advertisements circulating that make false promises about online investments in the financial market. Most often, a supposedly professional-looking financial advisor appears, advertising the fictitious results of his fund. As a customer, all you have to do is transfer the desired amount and the rest will take care of itself.
It is possible that an account will actually be opened for you, but with a shady and unregulated broker. However, after one or two transactions, your entire account balance will be wiped out by fraudulent brokers. The investment fraudsters then blame the markets, but you have pocketed the money yourself.
Fraud scam – brokers refuse payout
As soon as a customer has registered on the so-called trading platform, a “broker” or call centre employee will contact him. The aim is to convince investors to make ever larger investments in the long term in order to make the greatest possible profit.
As soon as the consumer has deposited his capital within a short period of time, the first profit development is shown on the customer’s account. The point is that investors believe in the financial product and make new investments.
In fact, no transaction takes place. Instead, fraudulent brokers transfer the deposited money to a foreign account.
Those who eventually wanted to receive a payout are put off by the “broker”. He demands payment of taxes and processing fees. The sole purpose of the delaying tactic, however, is to get even more money.
Fraudulent brokers claim that the trading account must have a fixed amount that can be paid out. It is just an excuse to take more money from unsuspecting traders. The other excuse may be that there are technical problems that make payment impossible.
Broker does not pay out: Eventually, the connection is completely broken at some point. The deposited capital has disappeared. Sometimes the scam broker simply pretends that he has never heard from you or received any money from you.
Manipulated trading software
The use of manipulated presentation software is very popular with fraudsters.
However, for fraudulent brokers, the demo account is a fake software that simulates trading and always offers more profits than losses by “chance”. This creates trust. The client feels like the best trader in the world, which motivates him to try it now with real money.
Account changes and profits are, however, only faked in the end by the platform operator fraud software.
The broker is based abroad – what opportunities are there?
Companies based in so-called tax havens usually have bank accounts that are subject to tax restrictions and only hold funds for a short period of time.
Since shady brokers are aware of their actions and face prosecution if they do not disburse the money, they seek refuge in tax havens and use false identities to disguise their true identities.
Victims whose online brokers do not make restitution can turn to financial regulators and law enforcement agencies. This is because in some countries, victims of fraud have the opportunity to access specially set up funds.
In addition, you should confide in a lawyer who knows the relevant area of law and who will ideally ensure that the broker pays compensation.
If your online broker refuses to make a payment, we will be happy to assist you. Our lawyers will explain to you what legal options you have and how you can possibly get your money back.
In doing so, we will work across borders for clients who are based in Germany, Austria or Switzerland. Would you like to talk to us about online trading? Then you can access our contact area here.
Broker warning – BaFin
Blacklisted brokers – is there such a thing? In fact, consumers have the opportunity to find out about “black sheep”, i.e. dubious providers of online trading platforms.
The Federal Financial Supervisory Authority (BaFin) regularly publishes warnings about online brokers that are to be classified as dubious. On a specially set up website, the authority collects its information, which can be searched for certain terms.
In addition, there are further notices from foreign financial authorities or also from law firms on the subject of “brokers do not pay out”. It is therefore advisable to inform yourself about a provider in advance within the framework of an Internet search if you intend to use your money there for online trading.
On our website of the Herfurtner law firm, we also report on current offers from providers and make a lawyer’s assessment.
Broker fraud what to do? Trading money back
Have you been victimised by a fraudulent broker? Your broker is not paying out your money? You would like to get your investments back from online trading and are encountering difficulties?
In these cases, you should exercise your rights as a consumer and follow the instructions below:
- Do not make any further deposits.
- Contact a lawyer and describe your experience.
- If necessary, with the help of the lawyer, file a complaint for fraud with the police.
- If the suspicion of fraud is confirmed, there are various civil and criminal legal steps whose chances of success will be assessed and used by a competent lawyer.
In recent years, our law firm has been able to help many clients to recover money they thought they had lost, or at least part of it.
If you have invested in or made payments to one of the companies on this list, our lawyers will be at your disposal at short notice.