The Financial Conduct Authority (FCA) has warned Contracts for Difference (CFD) providers to provide fair value after uncovering poor practices during its latest review.
“The Consumer Duty raises the bar for consumer protection across financial services and CFD providers must meet those standards.
“CFDs are complex, risky products and it’s vital that providers act to deliver good outcomes, communicate clearly and provide fair value,” said Mark Francis, director of sell-side markets at the FCA.
The regulator reported some good practices, including firms simplifying fee structures and restricting investors who might not be able to shoulder losses from buying CFDs.
FCA warns CFD investors risk losing key protections
However, it also found firms weren’t adequately considering consumer complaints or customer satisfaction as part of their fair value assessments and had made little or no changes to their products to comply with the Consumer Duty.
The FCA reported that firms continue to apply varying levels of overnight funding charges without providing clear justification and charge overnight funding separately on matched long or short positions, incurring potentially significant ongoing charges with little benefit for the consumer.
Where necessary, the regulator will engage directly with firms included in this review to facilitate improvements and act against any firms or individuals that fail to meet required standards.
