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FCA takes action on ‘advisory firms’ spread betting sales

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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.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Selling? Excuse me? What was the RDR? I thoght selling was now confined to history and that advisers advised.

  2. I trialled an advisory service from a company called “Faraday Real Time Trader” for 2 years. They made roughly 700 recommendations in that time aiming to make 3% on each trade, with a 3% stop loss. Guess what? Almost exactly half of the trades made a profit and half got stopped out. In other words pure guess work, a monkey with a pin would have got the same result. They charged about £600 for this service, but had I actually made the trades (I’m not that stupid), they would have made £40 on each trade, so another £2800 profit for them.

  3. Once commission was no longer an option under main stream regulated advised investments, is there any surprise that there was an up swell in non-main stream, unregulated and/or non advised investments?

    Those who advise adapted if they needed to and continued looking after their clients.
    Those who sell, likewise adapted and continued to look after themselves.

    Tighter, pre-scripted disclosure would go a long way to solving this and yet we still see weird and wonderful investments going bust, vertically integrated companies paying ‘commission’ and people thinking they are getting advice when they aren’t.

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