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Principal Trading

This is a practice where stockbrokers acquire large volumes of shares at a
discount from the market price.

We sampled 100 trades from 5 different stockbrokers and the average mark-up was 40%!

This means that for every £10,000 invested, the stockbroker made a profit of £4,000!

If you had known about this conflict of interest would you have invested?

Principal trading is allowed under financial regulation but there are very clear rules that firms must follow.

  • The firm must disclose they are acting as principal
  • The firm must ensure the investor understands the conflict of interest
  • The firm must disclose the price they paid for the shares



How do I know if my stockbroker was trading as principal?

In most cases the stockbroker would have disclosed this in the small print of each contract note, which followed your agreement to invest. A quick check of your paperwork should help you establish this.

If your firm acted as principal but didn’t disclose this before you agreed to invest then call a Hallbrook expert today!




What if the firm is still trading?

If the stockbroker is still trading any complaint must be made directly to the firm. There are regulatory procedures and timeframes the firm must adhere to when dealing with any complaint.

If you are unhappy with the final decision your complaint can be referred to the Financial Ombudsman Service (FOS).



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