If you have suffered significant investment losses as a result of the recent surge in the Swiss Franc through a hedge fund or stockbroker, you may be able to recover your losses through NFA arbitration, securities litigation or commodities litigation.
Overview of the Surge in the Swiss Franc
On January 15, 2015, the Swiss National Bank made the decision to decouple the Swiss Franc – one of the world’s most stable currencies – from the Euro and remove the artificial ceiling the bank had placed on it to prevent the currencies appreciation. This decision by the Swiss National Bank came as a complete suprise to brokerage firms and FX traders, which had a dramatic impact on the currency markets.
After the bank’s decision, the Swiss franc surged against the Euro and US dollar. While holders of Swiss francs enjoyed the appreciation in value, many current traders, investors, brokerage firms, and hedge funds suffered significant losses.
To make matters worse, the losses may have been amplified through the use of leverage, which is common in currency trading. Because currencies don’t usually move much in a single day, significant leverage (in many cases 50:1) is used to help boost returns.
In many cases, the losses would have occurred in the Euro because the Swiss franc surged against it. For example, a trader who invested $10,000 in the Euro on 20:1 leverage, would have had a total investment of $200,000 in the Euro. With even a 5 percent decline, the investor would have lost the their entire investment and may have ended up owing the brokerage or trading firm money (i.e. a margin debit balance).
Swiss Franc Hedge Fund Investment Loss Recovery
Many investors suffered significant losses when the Swiss franc surged. Investors may have suffered losses in either hedge funds or other pooled investment vehicles, which suffered severe losses. Some hedge funds are reported to have suffered severe investment losses, or have closed as a result of this development. According to reports, some of the funds suffering massive losses include: Discovery Capital Management (South Norwalk, Connecticut); Comac Capital, and Everest Capital Management’s Global fund. The losses in the Everest Capital Global fund were so severe that the fund is reported to be closing.
FOREX fund managers have a fiduciary duty to fully disclose the risks of the funds, and to place trades within the approved trading strategy the fund disclosed to investors. As such, these fund managers may be liable if they derogated from their duties to the fund investors by placing risky bets on the Swiss franc which ultimately caused the fund to suffer substantial losses.
In addition, stockbrokers or financial advisors who recommended funds that suffered substantial losses in the Swiss francs may also be liable for failing to adequately conduct due diligence on the fund, or otherwise monitor its performance. Stockbrokers or investment advisors have a duty to ensure that they conduct due diligence on investments that they recommend to clients, and need to ensure that if they are recommending a risky hedge fund or other pooled currency investment vehicle to only recommend these investments to investors who can sustain a complete loss in their investment. As a result, investors that suffered substantial losses in funds as a result of the surge in the the Swiss franc may be able to recover those losses against the fund directly (or the fund managers), or the stockbroker or investment adviser recommending the fund to them.
Investors Suffering Swiss Franc Losses as a Result of their Stockbroker or Investment Adviser May have Recovery Options
Investors who suffered losses with a stockbroker or investment adviser that was engaged in FOREX trading on their behalf may be able to recover those losses directly against the broker or financial advisor engaging in that trading activity. Generally speaking, foreign exchange trading (FOREX trading) is volatile and is generally speculative in nature. Due to its risky nature, FOREX trading or investing is generally only suitable for investors can suffer significant (if not a complete) investment losses in the currencies being traded. FOREX trading and investing is generally not suitable for those who are investing their retirement funds.
As a result, those stockbrokers, financial advisors or investment advisors who engaged in FOREX trading in the Swiss franc on their clients’ behalf which ultimately led to causing them to suffer substantial investment losses may be liable for such losses. If you are an investor that suffered losses in the Swiss Franc as a result of a risky FOREX trading strategy employed by your stockbroker, financial advisor or investment advisor, you may be able to recover those losses through arbitration or litigation.
If you have suffered investment losses as a result of the surge in the Swiss Franc – whether through a hedge fund or other investment vehicle or as a result of your stockbroker or investment advisor’s FOREX trading strategy in your accounts – please contact Kons Law Offices at (312) 757-2272 for a FREE, NO OBLIGATION consultation to discuss your legal rights.
Kons Law Offices represents investors nationwide in FINRA arbitration, NFA arbitration as well as securities and commodities litigation matters. To learn more about the Firm’s financial services litigation and arbitration practice, please visit www.investmentlossattorney.com