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FCA reissues warning to firms dodging high-risk investment duties

The FCA has reiterated its warning to firms selling high-risk, speculative products on the back of intervention from EU regulators to protect consumers.

The European Securities and Markets Authority tightened its rules over how so-called “contracts for difference” products – which include spread bets and rolling spot foreign exchange products – could be distributed to retail clients in June.

Those rules coming into force from today.

In a statement this morning, the FCA said it fully supports Esma’s move, but cautioned firms that it would be vigilant over those trying to avoid the new CFD rules by swapping in other high-risk products.

Features including leverage, complexity and the potential for large trading losses to retail clients that are common to CFDs remain of concern to the FCA, it says, with Esma noting products such as “turbo certificates” as comparable in some ways to CFDs.

The FCA says: “ESMA’s intervention is focused on CFDs, but we remind firms of their existing obligations. In particular, if a firm is considering marketing, selling or distributing alternative products, it should pay attention to conduct of business requirements.

“These include rules on the client’s best interests, communications with clients and financial promotions, and suitability and appropriateness. We also expect firms to consider carefully whether they can satisfy their relevant product governance obligations.”



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