The FCA has reminded firms offering contacts for difference
(CFDs) that CFDs are highly leveraged derivatives and adverse
price movements in relevant markets can lead to substantial
losses for consumers.
Approximately 80% of customers lose money when investing in CFDs
and, because of the risks, the FCA has undertaken an extensive
programme of work to ensure consumers are as protected as
possible. The sector has attracted a number of firms, often
accessing the UK from overseas, that do not deliver good customer
outcomes. In 2020 and 2021, FCA action stopped 24 firms marketing
CFDs in the UK. The actions in 2021 alone prevented an estimated
£100 million a year of harm to UK consumers. Further FCA action
has been taken in 2022 and will continue where justified.
Sarah Pritchard, Executive Director of Markets at the FCA said:
"We have set out the standards we expect CFD firms to demonstrate
in order to protect consumers and ensure market integrity. CFD
providers authorised in our regime must sell products
appropriately, and when the new consumer duty comes into effect,
will need to ensure that products deliver good outcomes for
retail consumers. We will not hesitate to take swift and
assertive action where we identify harm."
In some of the worst firms, the FCA has seen examples of fake
celebrity endorsements, the use of pressure-sales tactics to
persuade people to invest increasing amounts of money and
inducements being given to customers to upgrade to elective
professional status despite clients not meeting the criteria and
losing protection under our rules. The FCA has also seen some
firms giving investment advice without authorisation.
The FCA has written today to CFD
providers outlining our expectations and highlighting
areas of poor practice seen in firms. The FCA expects all firms
to have agreed actions and next steps in response to these
concerns by January 2023 and in advance of the new consumer duty
coming into force. Consumers considering investing in CFDs are
reminded to:
- Check the Financial Services
Register to see if the firm you are dealing with is
FCA-authorised.
- Check our unauthorised firms and
individuals page, where you can search for names on
our Warning List.
- Think carefully before choosing to ‘opt up’ to professional
client status as you will lose the protections FCA rules provide
retail consumers.
- Think carefully before choosing to deal with an overseas firm
which might not provide retail consumers the same protections as
FCA rules.
Notes to editors
Our ongoing focus on the CFD sector forms part of our wider
Consumer Investments strategy. Further detail on this strategy
can be seen by following the links provided below. The ‘Consumer
investments data review April 2021 – March 2022’ contains a CFD
case study on the post-entry-to-TPR interventions conducted in
2021. We also provide links to some key sector-specific actions
from 2016 to date.
- 2/2/2016 Dear CEO letter: Client take-on review in firms
offering contract for difference (CFD) products
- 29/6/2017 Publication: CFD firms fail to meet our
expectations on appropriateness assessments
- 10/1/2018 Dear CEO letter: Providers and distributors of
CFD products: resolving failings which may cause significant
consumer harm
- 1/7/0219 Press release: FCA confirms permanent
restrictions on the sale of CFDs and CFD-like options to retail
consumers
- 1/6/2020 Press release: FCA bars Cypriot firms that
used unauthorised celebrity endorsements
- 15/6/2020 Press release: Cyprus CFD firms Maxiflex Ltd,
Maxigrid Limitd and Reliantco Ltd
- 16/4/2021 Press release: FCA stops FXVC offering CFDs
to UK customers
- 26/5/2021 Press release: FCA stops EverFX offering CFDs
to UK customers
- 2/7/2021 Second Supervisory Notice: FXBFI Broker Financial Invest
Ltd
- 5/8/2021 Press release: FCA stops BDSwiss offering
contracts for differences (CFDs) to UK customers
- 14/9/2022 Publication: Consumer Investments: Strategy
and Feedback Statement
- 16/10/2022 Publication: Consumer investments data
review April 2021 – March 2022
