FCA: Do not send offshore customer questions

First, the FCA warns companies about customer churn or customer movement and the practice of sending customers to overseas subsidiaries or similarly named businesses。This practice provides margin trading services outside the scope of FCA and ESMA regulation and customer funds protection, and is outside the strict margin limits imposed by these two regulators.。

The FCA has previously removed pass rights for CFD brokers, including a number of Cyprus-based brokers regulated by their Cypriot counterpart CYSEC, and the FCA has banned a total of 24 companies from marketing CFD in the UK。

In December alone, the FCA issued a warning to these companies, which they believe may be offering financial services or products in the UK without FCA authorisation, including:

SMARTEXFX BelleoFX Automated Forex Trading Cryptocreek-mining.com ultimatetrustfx.uk Forex Trading Station COINTRUSTFX STOCK BIT FX prime wealth trade

FCA: CFDs are high risk

FCA reminds CEOs that FCA treats CFDs as highly leveraged derivatives that can cause significant losses to customers in the event of adverse price movements。

Sarah Pritchard, Executive Director of Markets at FCA, said: "We have set the standards that CFD companies should meet to protect consumers and ensure market integrity.。CFD providers authorized under our system must sell products appropriately。When the new consumer responsibility takes effect, there will be a need to ensure that products deliver good outcomes for retail consumers.。Once the damage is discovered, we will not hesitate to take swift and decisive action。"

Consumer responsibility is a new FCA principle that UK companies must comply with, aiming to achieve the good results described by the FCA for retail customers of financial services businesses.。

Specifically, businesses regulated by the FCA must act with integrity, avoid foreseeable harm, and help and support customers in achieving their financial goals.。The new rules will be implemented by the end of July next year.。

FCA: Don't report insider trading

CEOs of CFD brokers and CFD trading platforms have also been criticized on another issue, insider trading.。

FCA believes firms are not doing enough to identify and report suspected insider traders。

In its "Dear CEO" letter, the FCA reminded executives that if they did not do enough to identify and report suspected insider traders, they could be fined and banned.。

In fact, in October, the FCA fined Sigma Broking 53.£10,000 because the company did not report transactions and did not file suspicious transaction reports。Two of the company's directors have also been barred from holding regulated positions in the future.。

Greater consumer protection is always welcome, and the FCA's comments reinforce the message that you should only trade with regulated brokers within the UK and not abroad。Regulators, however, often seem to be going the old way。

In the Good Currency Guide, we believe that one of the best ways to encourage better outcomes for retail customers is to strengthen consumer education。

But this must be a two-way street, and clients must be willing to be educated about the positive and negative aspects of leveraged trading, manage margin trading accounts sensibly, and avoid taking excessive risks or over-trading。

FCA in Action

On June 1, 2020, the FCA banned four Cypriot investment firms offering CFDs to UK investors from using fake social media ads to attract CFDs customers to register.。You can read the notice issued by the FCA for each broker here:

F1Markets Ltd Hoch Capital Ltd, Magnum FX (Cyprus) Ltd Rodeler Ltd.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: "The UK's Financial Supervisory Commission has removed these companies' pass rights, which effectively prevents them from continuing to offer such products in the UK.。We welcome further action by CySEC。FCA's investigation into the industry continues。

The Times also highlighted the FCA's actions, but even well-known national news outlets have in the past advertised investment scams without their knowledge.。

Unauthorized celebrity endorsements for CFD trading

The ban comes after the companies claimed they used unauthorised celebrity endorsements, directly or indirectly, on social media to promote CFD trading.。The FCA has ordered the firms to stop selling CFDs to UK customers, close existing positions with UK customers, refund funds to UK customers and notify UK customers of the FCA's actions.。

Banned companies have the right to appeal the FCA's decision and seek review of the action.。However, the FCA notes that they estimate the companies have no presence in the UK, their company is based in Cyprus and UK investors may have lost hundreds of thousands of pounds on these investments.。

The use of fake celebrity endorsements is nothing new for financial advertising, they circumvent ad network rules but still slip through the net。

What this means for the CFD industry？

This is a good thing for regulated CFD brokers in the UK.。There is a huge difference between brokers who provide CFDs responsibly and align with their clients' interests and those who only exist for the sake of slaughtering customers.。

The CFD industry has changed dramatically over the past few years。For example, B-booking is down, the days of customer churn are over, and CFD brokers are looking to expand their investment offerings.。

When we interviewed IG CEO June Felix, she was very keen to highlight the fact that they don't hedge with clients。IG also offers SIPP and Investment ISA accounts, where clients can hold long-term investments while making short-term speculative trades.。

Commenting on recent news, an IG spokesperson said: "IG wholeheartedly welcomes FCA's sweeping action to close these companies.。"Over the years, we have seen UK consumers become targeted and harmed by companies outside the UK for their bad behaviour, and in some cases even illegal behaviour."。