Broker Bullies -- (Part 1 -- T212)
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| Author       | Source       | 
| :-------------: |:-------------:|
|  [u/Kronens](https://www.reddit.com/user/Kronens/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/oaeeu0/broker_bullies_part_1_t212/) | 

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[Possible DD 👨‍🔬](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Possible%20DD%20%F0%9F%91%A8%E2%80%8D%F0%9F%94%AC%22&restrict_sr=1)

UK Lawyer Ape here to break up the monotony of interesting posts with everyone's favourite bed time subject - THE LAW...

My opinion - Brokers have been skirting around their legal obligations to their consumers for months now and (personally) I think they are seeing what they can get away with to mitigate their risk and the risk of their institutional clients. The T212 saga today was just the latest in a line of failures to act in their consumer clients' best interests. I've been meaning to do a write up on what Apes might be able to do in response and this is the first part. More will follow if you're interested.

*Disclaimer first: this is not legal or financial advice. The procedural information provided is freely available online and the bit where I set out my thoughts on the T212 clauses are my opinion only. You should not listen to me. Maybe it will inspire you to speak to T212, I don't know. These things are subjective and I would like to invite all the wrinkled brained lawyer Apes to review and let me know if there are mistakes. As you can see, I work with crayons.*

TL;DR -- I don't think what T212 have in their terms in relation to share lending is a fair contractual term and I believe it to be in breach of consumer regulations in the UK (and domestic international laws). You have a right to contest this, details are provided below, and you might want to know my thoughts on the specifics around the terms if you want to make a complaint yourself. As I mention, this is not clear cut, and it might be the specific protections raised don't quite cover the issue but from my experience where something is blatantly detrimenting the consumer; there is a law seeking to protect them.

Intro

I may be a smooth brained lawyer (who has only made terrible memes up until now on this sub) but I took a look at the T212 terms and have some problems with what they're doing.

These notes are primarily focused on the UK as I'm based in London but a lot of this may be adaptable for our international Apes as I expect processes with regulation authorities to be fairly similar. The procedure will most likely involve speaking with your broker in the first instance and then reporting your complaint to a regulatory body if your matter has not been suitably resolved.

To summarise the legal fundamentals behind this note:

1.  I called up the Financial Conduct Authority to check that individuals agreeing to broker terms were able to rely on consumer regulation protections and more specifically the unfair terms legislation (we are*);

2.  I checked Chapter 10 of the Financial Conduct Authority Handbook and Schedule 3, section 2A of The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (FSMA) and think there is a probability that in acting for two opposing clients simultaneously (Ape Long and Hedgies Short) and acting in a manner which benefits one over the other (lending shares to SHFs which has the effect of devaluing Apes stonks) T212 are in breach of the FSMA in relation to conflicts of interests.

3.  I believe that clause 22 of the T212 Share Dealing Service Terms of Business is likely to be in breach of section 62 of the Consumer Rights Act 2015 (CRA) in relation to unfair contract terms.

*For the purposes of the CRA you will only come within the protections if you are acting for purposes that are wholly or mainly outside of your profession.

To note: my interpretation of the regulations, is my interpretation and opinion only. It is not clear cut, but I believe that T212's actions amount to a breach of the CRA and FSMA.

Part 1 - So, what can we do about this?

The Process

Call me a pessimist but I don't think T212 will be the only ones to try this. The process outlined below therefore refers to "brokers" rather than T212 specifically for future use.

I also believe this might be useful for Apes outside the UK as international guidance (especially in the EU) is likely to be relatively similar.

Step 1: Contact the broker

Contact the broker as soon as possible in writing so that you have a record of what they say and being speedy allows you to show in the future that you took this matter seriously from the outset.

Financial services firm in the UK have 8 weeks to respond formally (mad right?) however if the broker gives you a deadline for a response it does not seem unreasonable to also set your own deadline before you report the matter to a regulatory body.

Unless they can resolve your issue in 3 business days, they do need to acknowledge your complaint within a reasonable time after those three days.

Step 2: Make the complaint yourself

Lawyers can be expensive, but don't you worry your fluffy little head, you beautiful ape; you can do this all by yourself!

Make sure you identify the problem and terms you feel are not fair.

To make it a little easier I have also provided you with some wording that you might find useful in Part 3. But that's up to you, I'm not your lawyer.

Step 3 -- Contact the Financial Ombudsman

If you are not happy with the response you receive from the firm (again, as a pessimist I have my doubts that you will be happy), or you do not hear from them within the relevant time period (also very probable), the​​​​​ Financial Ombudsman Service may be able to help you.

The Financial Ombudsman Service is a free, independent service for settling disputes between financial services firms and their customers (if you don't already know about them).

**International Apes, I expect you will have similar regulatory bodies which I expect will help you much in the same way.**

The success of a complaint like this may be limited. However, I personally believe that the more eyes we get on this the better. Drawing attention to unfair practices now is better than waiting until all this is over.

Proactively confronting unfair dealings is the only way consumers can show that they do have power.

Step 4 -- Court

We'll keep this one in the back pocket for another day but you should know that you always have the right to take things like this to court; regardless of a regulatory body's decision.

Part 2 -- What do I think T212 may have done wrong?

![Screenshot 2021-06-30 064333](https://user-images.githubusercontent.com/82035192/123947603-8cfdb800-d96e-11eb-8142-0a76b1d5085b.png)

You can see from the above picture the inner workings of a legal genius who just about managed to review the terms before the impulse to eat all the crayons took over.

My verdict? Clause 22 doesn't seem very cash money of T212.

What they're basically saying is that they can lend out your shares to institutions unilaterally; an act which would actively devalue your asset that you have purchased in favour of your competition in all this; the SHF.

I believe that due to this, T212 are likely to have a conflict of interest by being a provider of services to you as a long investor and a SHF by making a decision to lend your shares out (with threat of punitive action should you contest it) for the sole benefit of the SHF.

No... doesn't seem very cash money at all. In fact, someone would call that a d**** move.

I won't go into too much more detail here as I want to get this out quickly to hopefully get the ball rolling for as many of you as possible. However, Part 3 below explains the specifics of the perceived breaches in consumer regulations and the intro above refers to the sources that I base this off.

Part 3 -- How might you speak to a broker like T212?

When I spoke to the Financial Conduct Authority they gave me the following details to raise a complaint with T212 (you know, if that's what you want to do):

Email: <Compliance@Trading212.co.uk>

Phone Number: 0203 816 0199

**I want to make clear that this is just an example of something that can be sent in similar circumstances. I am not encouraging or advocating that you necessarily send this or something similar and if you do send anything similar to T212 then you should only include what you believe is correct to your individual circumstances. I have suggested extra reading into this topic but please do your own research and even get a lawyer if you are looking for legal advice. None of this is legal advice.**

*Subject: Securities Lending Complaint*

*Dear Compliance Team*

*I recently logged into my T212 trading account and was notified that in accordance with clause 2 of your Share Dealing Service Terms of Business (the* *Terms**), I am required to give consent to lend my shares to a third party or suffer penalties (the* *Proposal**).*

*To confirm and for the avoidance of doubt, I do not authorise you to lend my shares to any third party. I purchased the shares with the understanding that they were mine to own and I would receive all proprietary rights as would be expected in any exchange for such a security. That includes the ability to choose whether to lend or not to lend that security to anyone.*

*I also do not accept the punitive measures that you threaten in this correspondence. These penalties are not in accordance with my legal rights as a consumer.*

*If you do not revoke your ability to lend out my shares without imposing penalties by the 9 July 2021 I will be notifying the Financial Ombudsman with full details of the complaint.*

*In the meantime and to consider the current situation in more detail please can you provide the following:*

*1\. Evidence that in accordance with clause 22.1 of the Terms that I gave explicit consent to lending shares in my account;*

*2\. An explanation as to why (presumably) you do not consider the Proposal to be in breach of Chapter 10 of the Financial Conduct Authority Handbook and Schedule 3, section 2A of The Financial Services and Markets Act 2000 (Markets in Financial Instruments) Regulations 2017 (FSMA)? To clarify, T212 is acting as a financial firm to both myself as an investor and a third party who is most likely to use that share to short the stock I have invested in. Both myself and the third party are therefore clients of yours however you are clearly favouring the third party over me as an investor of the stock as the act of shorting that stock will devalue my investment. By imposing penalties on me if I do not agree to this, you are without a doubt favouring the third party as a client whilst harming my investment. Please confirm why T212 consider this not to be a breach of the conflict of interest provisions of the FSMA and FCA mentioned above?*

*3\. An explanation as to why clause 22 of the Terms is not in breach of section 62 of the Consumer Rights Act 2015 (CRA) in relation to unfair contract terms? Clause 22 gives T212 the unilateral ability to lend out shares that I have invested in to the detriment of my shareholding. No investor in their right mind would allow their shares to be lent out to a third party who is likely to use that share to short the stock as it would clearly devalue the initial investment. I see no benefit in the clause for me as an investor; which (I'd like to point out) is hidden away in one of many of your terms and conditions.*

*I will require a response to these queries as soon as possible considering the very limited timescale you have given me to consider my options. If I do not hear from you before the 9 July 2021 with what I consider to be an adequate response in resolution of this matter or if you have not by that time revoked the Proposal I will be contacting the Financial Ombudsman to make a formal complaint about your business practices.*

*Yours faithfully,*

Part 4 -- What Comes Next?

That really depends on how T212 would like to deal with this. In my opinion, they are likely to get a lawyer to go through why these provisions do not apply (in their opinion). At that point, the regulation authority should decide whether that is true or not.

On the face of it, this seems blatantly unfair to the consumer and where that happens (in my experience) more often than not it is a breach of a rule or regulation that seeks to protect a consumer.

If people would find it useful I can do some further research on how someone might make a formal complaint to the Financial Ombudsman. I would recommend that would need more details in relation to specific breaches of the legislation and the terms.

I have also been thinking about setting out my thoughts on notifying conduct authorities about:

1.  The brokers' action in trading halts in January;

2.  Unfair terms in T212 and other brokers terms;

3.  US market practices and the role of domestic brokers in managing this risk.

I would appreciate any feedback and suggestions!.

TL;DR -- it's at the top you lovely, smooth-brained, simple ape.

*Further disclaimer: in case in the interest of making this a little less formal anyone thinks this is unprofessional or could make lawyers look bad; I'm doing this to help people, it's free, law isn't entertaining (but I gave it a go), I don't actually eat crayons and you're wrong.*
