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ARTICLE · 15 JANUARY 2018

FCA Sets Out 'Serious Concerns' With Contracts For Difference After Year-Long Review

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The UK's Financial Conduct Authority (FCA) has "serious concerns" over the way in which 'contracts for difference' (CFDs) are being promoted and sold to unsophisticated investors...

United KingdomFinance and Banking
Michael Ruck
Michael Ruck

The UK's Financial Conduct Authority (FCA) has "serious concerns" over the way in which 'contracts for difference' (CFDs) are being promoted and sold to unsophisticated investors, which it has warned have the potential to cause "significant consumer harm".

Three quarters of retail customers who bought CFD products on either an advised or discretionary basis during a year-long review of the sector by the FCA lost money, the regulator said, in a letter to the chief executives of CFD firms (7-page / 100KB PDF) that it published on its website.

The FCA assessed 19 CFD providers and 15 firms that distribute CFDs to retail investors as part of its review. It found examples of ineffective customer communications, weak conflict of interest management arrangements and problems with the way in which firms identified and categorised clients, as well as "significant room for improvement" in firms' remuneration arrangements.

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