FCA orders fresh scrutiny of spread betting 14th Oct 2015
The spread betting/CFD industry, finally has been by a wave of regulatory interventions, will be the focus of fresh scrutiny after the board of the UK financial FCA http://www.fca.org.uk/site-info/contact watchdog ordered more information gathering.
Concerns “around the providers of Contracts for Difference” were a key discussion point of the Financial Conduct Authority board’s July meeting, which told the regulatory team responsible to garner more information and report back, according to minutes published this week.
The board also noted some specific concerns from the team around the providers of Contracts for Difference and asked for further information in relation to the work being done to understand the sector,” the minutes read. “The board noted the consideration of issues around the regulatory perimeter(false and misleading advertising/ thats illegal in Australia and UK), in particular ongoing work looking at the promotion and appropriateness tests for purchase of contracts for difference.”
CFDs are central to spread betting and are a way to gamble on price movements without owning a particular share, which is subject to stamp duty. CFD providers include spread-betting companies as well as rolling spot forex groups.
In the UK there are about 100 FCA-regulated companies that primarily offer CFD trading, while another 130 have a regulatory “passport” to operate after registering elsewhere in the European Union, typically Cyprus, according to FCA statistics.
The FCA said there was an ongoing review of the sector in place and declined to comment further.
Even before the FCA board’s call-to-arms, spread-betting groups have attracted the attention of regulators, both in the UK and in countries such as Ireland. Plus500 — the online trader of CFDs that is the subject of a £450m takeover bid by Playtech, the London-listed gambling software company — froze all UK customer accounts following an investigation of its business practices by the FCA.
The London-listed, but Israel-based, CFD group must now require customers to provide additional documents to prove their identity for compliance with anti-money laundering rule, and was required to appoint new compliance staff to oversee the business.
Plus500 had also been an aggressive user of online marketing methods known as affiliate marketing, where one website is paid for directing traffic to another. Competition for business has led to a proliferation of sites claiming to offer reviews of CFD providers without disclosure of commercial links.
Forex turmoil brings regulatory issues into sharp focus
Majority of UK operators are based offshore away from market regulator’s scrutiny.
Large losses for some amateur CFD users in January, when the Swiss National Bank abandoned a currency peg against the euro, have also raised questions about the appropriateness of complex financial products marketed to retail customers.
Clients can put up only a small amount of capital while gaining exposure to a much larger bet. If the markets go the right way customers have the chance to win many times their original stake. If they do not, a small move quickly wipes out their deposit, which goes to the broker.
CFD providers have a responsibility to assess whether their products are appropriate and to warn customers when they may not be. In a 2011 investigation of four CFD and spread-betting companies, the Central Bank of Ireland found inadequate procedures in place.
Interesting news maybe more will follow in our news in next few weeks.
1.What I want to know does this mean our own ASIC will get there finger out and do something?????.
2.What about if many people complain to the UK Financial Conduct Authority about CFD providors. Will they could they be made illegal or changed??.
I do believe that they as in ALL CFD providors should be investigated.
Opinions anyone on the future of CFD???????.
