Mr Eamon Quinn, The Post
A major US stockbroker has told high-net-worth Irish investors to prove that they are wealthy or face costly sanctions.
Cantor Fitzgerald has told major Irish stockbrokers to instruct their clients who use Cantor’s contracts for difference (CFD) products to prove they can sustain losses. Cantor has given the clients a deadline of July 1 to submit statements of their net worth.
Most of the Irish brokers, including Davy, Goodbody, Bloxham and Merrion Stockbrokers, act as retail distributors in Ireland for Cantor’s CFDs. CFDs – highly leveraged derivative products that allow clients to bet on the direction of an underlying share price – account for over a third of all share transactions on the Irish stock exchange.
Cantor’s demands come after clients lost money on their CFD bets in the last two weeks after sharp falls in Irish bank stocks. Last year, clients faced huge losses on CFDs after the share price of Elan.
In a letter sent on May 17, Goodbody Stockbrokers told its clients that it was ”most unhappy with the short notice” provided by Cantor and said that it had expressed its ”dissatisfaction” to the US broker.
Other brokers have also passed on Cantor’s instructions to their clients.
The letter from Goodbody also said: ”Accounts that are supported by net worth statements are being charged a margin of 2 per cent over cost of funds, while for unsupported accounts the margin is 3.25 per cent.
”These new funding rates are being implemented by Cantor Fitzgerald with immediate effect. If a client provides a net worth statement before 1st July, then the funding rate differential will be rebated. As mentioned previously, we would ask you to provide a statement as soon as possible from your accountant or bank manager.”
Eamonn Glancy, head of private clients at Goodbody Stockbrokers, said it would be up to individual clients whether they supplied the documentation of their net worth to Cantor.
Bloxham Stockbrokers managing partner, Angus McDonnell, said that Cantor was a wholesaler of the CFD product and that Bloxham clients had to decide whether to sign up to Cantor’s terms.
Spread betting company Delta Index said it expected to benefit from the Cantor move.
Managing director Dermot O’Donoghue said the company did not seek statements of net worth from clients.
”We have received interest from CFD customers of stockbrokers who are upset at what they see as an unwarranted intrusion,” O’Donoghue said.
Market sources said that many CFD clients had faced losses, particularly those betting on the direction of the underlying Anglo Irish Bank shares, amid the market turmoil of recent days.