The FCA is looking to impose stricter rules for firms selling risky spread bets and rolling spot foreign exchange products.
The regulator said it had concerns about unsuitable advice being given by intermediaries operating in the ‘contracts for difference’ space, including high commissions, and was doing further supervision of these ‘advisory’ firms.
The FCA says: “We have…detected concerns with the conduct standards of some intermediary firms who are offering advisory or discretionary-managed account services solely in relation to retail CFDs. We have concerns around the level of client losses and potential conflicts of interest related to these business models due to high commissions charged to clients.
“The suitability of advice or portfolios offered by these ‘advisory’ firms also appears highly questionable. We are currently carrying out further supervisory work in this area to address these issues.”
The FCA cited data suggesting the average client losses appear to be higher for clients that are sold CFDs on an advised rather than a non-advised basis.
The FCA is consulting on new rules governing CFDs. These include standardised risk warnings and mandatory disclosure of profit-loss ratios on client accounts by all providers, reducing leverage limits for inexperienced retail clients, and stopping providers using account opening bonuses to promote CFDs.