MF Global Holdings Ltd. was sued by an investor who claims the brokerage caused him to lose about 1 million pounds ($1.55 million) by encouraging him to make short-term, risky trades.
An account manager at MF’s GNI unit gave Michael Wilson, an Aberdeen, Scotland-based businessman, “market commentary and investment advice” that broke rules on execution-only accounts, Wilson’s lawyer, Jalil Asif, told a London court today.
Following advice from his account manager, Wilson took a “risky” strategy of short-term buying and selling of a type of derivatives that resulted in large losses. The brokerage should have “balanced what was said” by the account manager by telling Wilson the risks, Asif said.
In a separate case last year, another MF Global unit was ordered to pay a U.K. day trader about 20 million pounds over claims an account manager provided misleading information about profits on trades.
Wilson operated an execution-only account at GNI between 2003 and 2005, his lawyer Asif said. Even though it was an execution-only account the brokerage “permitted” Wilson’s account manager “to provide market commentary and investment advice” while he wasn’t permitted to do so under Financial Services Authority rules, Asif said in written arguments.
MF’s lawyer, James Smith, said the manager never gave investment advice.
“He was merely seeking to assist Mr. Wilson in the context of an execution-only dealing relationship,” Smith said. “Mr. Wilson knew perfectly well what he was doing and always would have traded the way he did.”
The case is: Michael Duthie Wilson v MF Global Ltd., HQ09X01868, High Court of Justice, Queen’s Bench Division.