FCA Rebukes Risky Spreadbet Firms For Compliance Failures

Adjust Comment Print

The shot across the bows prompted a flurry of activity by leading sellers of contracts for difference, with IG Group, CMC Markets and Plus500 all releasing statements created to calm any market jitters.

The European Securities and Markets Authority is planning a consultation later this month to consider measures to prohibit or restrict trading in CFDs for retail clients, amid its own investor protection concerns, the FCA notes.

The review assessed 19 firms that provide CFDs to intermediaries which in turn distribute this product to retail consumers on either an advisory or discretionary basis, and also evaluated 15 firms that distribute CFDs on these bases to retail investors.

The FCA says most firms in the "high-risk" market were failing to meet requirements for customer due diligence and managing conflicts of interest.


The regulator said it discovered that 76% of retail customers who bought CFD products in the period covered by the review, July 2015 to June 2016, lost money as a result. The FCA said it has written to the chief executives of all United Kingdom providers and distributors of CFD products, telling them.

It also found many firms could not properly explain who their target market was, and used overly broad terms, nor could they explain how they met their needs.

Overall, firms that remain in the business need to improve their oversight and controls.

IG Group Holdings PLC responded on Wednesday to the findings of the UK Financial Conduct Authority's review of contract-for-difference providers, stating it does not believe the review holds any new financial implications for the firm.


The company said it does not offer advisory or discretionary services for CFD products and has terminated relationships with distributors that offer its CFD product on a discretionary or advisory basis to retail clients within the United Kingdom and European Union.

'We have taken steps to address the observations made by the FCA in their individual letter to IG on this apsect of the industry in October 2017'.

'It also has very many distributors which it could find hard to monitor, ' he said.


Comments