The FCA today proposed a package of measures designed to protect consumers after research found 82% of CFD customers lost out when putting money into products such as spread bets or rolling spot foreign exchange products.
Among the measures is a proposal to introduce blanket standardised risk warnings and to force all firms to reveal the profit-loss ratios on client accounts.
The FCA claims the rules would protect customers after they discovered a catalogue of failings and increasing levels of poor conduct by CFD firms.
Christopher Woolard, executive director or strategy and competition at the FCA, said: “We have serious concerns that an increasing number of retail clients are trading in CFD products without an adequate understanding of the risks involved and as a result can incur rapid, large and unexpected losses. “We are introducing stricter rules for CFD products to ensure the sector addresses the shortcomings identified and that firms make sure retail clients are aware of the high risks involved in trading these complex products.”
The proposals include setting a leverage limit of 25:1 for clients with less than a year’s experience in CFD trading, and capping leverage for all retail clients at 50:1.
Providers could also be banned from offering bonuses or benefits to tempt customers into using CFD products.
The measures come after six years of research by the FCA found firms in the sector were not considering if CFDs were appropriate for clients, were failing to alert clients to risk and offered customers excessive leverage levels, some in excess of 200:1.
They also found binary bets, soon expected to be brought under the FCA’s remit, included features more akin to gambling than investments and needed to be more transparent in order for investors to properly value them.
A consultation on the proposed measures runs until March 7 next year, with a policy statement from the FCA expected by spring 2017.
