People who invest in Contracts for
Difference (CFDs) are being urged not to give up vital consumer
protections by the Financial Conduct Authority
(FCA).
CFDs are a way to bet on the price of
a share or asset moving up or down without owning it. The FCA is
concerned that firms are using high pressure techniques to
encourage investors to claim they are professional clients,
putting them at risk of losing more money than they can
afford.
The retail client protections,
including leverage limits and client loss protections, prevent
nearly 400,000 people a year from risking more than their
original stake in CFDs and provide between £267m and £451m worth
of protection.
The FCA has also found investors are
being targeted by finfluencers, who may not make it clear that
they are promoting unregulated firms operating offshore. Some of
these finfluencers promise consumers unrealistic returns if they
copy trades, invest in managed accounts or pay for daily trading
tips. Over 90,000 people have lost around £75 million over a
4-year period in this way at just one firm.
Firms must not push elective
professional or redirection promotions onto their retail clients.
The FCA will take action against firms breaking the
rules.
The FCA will continue to target
finfluencers touting financial services products
illegally.
Mark Francis, director of
Sell-Side markets at the FCA,
said:
“CFDs are complex, high-risk products. The protections given to
retail investors under our rules save UK consumers millions each
year. We are concerned that some firms are trying to get people
to invest more than they can afford to lose. Investors should be
very wary of CFD firms attempting to bypass our rules in this way
and of those on social media touting investments which look too
good to be true.”
Under the Consumer Duty, consumers
must receive communications they understand and products and
services that meet their needs and offer fair value.
The FCA's InvestSmart campaign has
useful tools to help people make more informed investment
decisions.
Notes to
editors:
-
CFDs are complex financial products
used to speculate on the movement in prices on a wide range of
assets. As a result, they carry a considerable risk of
substantial losses.
-
In the coming months, the FCA will
launch a consultation around client categorisation to ensure
the right protections apply for the consumers who need them and
create more freedom for those professional investors who
don't.
-
Some firms are promoting retail
clients to elective professional investor categorisation.
Clients' funds may be moved out of segregated client money
accounts, exposing the client to greater risk of loss in the
event of firm failure.
-
Others are redirecting retail
clients to associated CFD providers in third country
jurisdictions without equivalent consumer
protections.
-
In 2019, the FCA
restricted the sale of CFDs to retail
customers.
-
The figures on the benefits of
consumer protection are taken from the FCA's PS18/19 on
restricting CFD products sold to retail
clients
-
In June 2025, the FCA
led an international crackdown on illegal finfluencers that
resulted in 3 arrests, 7 cease and desist letters and 50
warning alerts being issued.
