FCA Will 'act' If CFD Providers Fail On Consumer Duty
The Financial Conduct Authority has stated it will take “swift and assertive action” if it identifies any consumer harm when it comes to the creation and promotion of contracts for difference (CFDs).
FCA Will 'act' If CFD Providers Fail On Consumer Duty
In a Dear CEO letter from the City watchdog, the regulator reminded firms offering CFDs that the products are highly leveraged derivatives and adverse price movements in relevant markets could lead to substantial losses for consumers.
FCA Will 'act' If CFD Providers Fail On Consumer Duty
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.
FCA Will 'act' If CFD Providers Fail On Consumer Duty
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FCA Will 'act' If CFD Providers Fail On Consumer Duty
“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.
FCA Will 'act' If CFD Providers Fail On Consumer Duty
“We will not hesitate to take swift and assertive action where we identify harm.”
FCA Will 'act' If CFD Providers Fail On Consumer Duty
According to the six-page letter, the FCA has found continued poor practice in the business models of a “significant minority of firms”.
FCA Will 'act' If CFD Providers Fail On Consumer Duty
The FCA highlighted:
- Scam/churn activities: a small number of firms in the UK’s Temporary Permissions Regime have targeted consumers for whom CFDs are inappropriate and use scam/churn techniques to directly profit from their clients’ losses.
- Circumvention of FCA Rules: Some firms circumvent our rules by inappropriately ‘opting-up’ retail consumers to ‘elective professional’ status, sometimes using incentives banned under the FCA’s rules. Other firms were redirecting retail customers to associated CFD providers incorporated in third-country jurisdictions without equivalent consumer protections.
- Affiliate marketers/ introducers: many firms have used unauthorised affiliates to introduce clients, paying them for their introductions. Firms’ oversight…
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