UK financial regulator issues warning to spread betting firms
The UK Financial Conduct Authority (FCA) regulatory body has warned spread betting companies that they must comply with its rules after a survey revealed poor practices that risk leaving customers unfairly treated.
On Tuesday, the FCA sent a ‘Dear CEO’ letter to firms that offer spread betting contracts for difference and ‘rolling spot’ foreign exchange products, which are all classed under the ‘contracts for difference’ (CFD) category by the regulator.
The FCA said it had reviewed procedures for taking on new clients who are not given advice when buying CFDs.
In the letter, Megan Butler, director supervision at the FCA, said “CFD providers industry-wide” are not meeting FCA requirements and could be failing to do enough to prevent financial crime.
Butler added that CFDs can put customers at risk of losing more than just their original investment, calling on companies to assess whether the products that they offer are suitable for the client.
The FCA used the letter to demonstrate how operators can employ various approaches to determining if a CFD is appropriate for a particular client, with many companies’ practices not in line with its rules.
Anti-money laundering controls were also insufficient in some cases, while the FCA also said that instead of assessing if a CFD was appropriate, companies were asking customers to tick a box to confirm that they understood the risks.
“These findings also suggest that firms may not be acting in the best interests of their clients and treating them fairly,” Butler said in the letter
“We also saw evidence of poorly worded risk warnings that did not set out the nature and risks of CFD products in a manner that was clear, fair and not misleading,”
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