The UK’s Financial Conduct Authority has issued a warning to
Contracts for Difference providers, following a review that found some firms
had not met the standards set under the Consumer Duty. The duty, introduced in
July 2023, establishes higher expectations for consumer protection across
financial services.
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Mark Francis, director of sell-side markets at the FCA,
said: “The Consumer Duty raises the bar for consumer protection across
financial services and CFD providers must meet those standards.”
CFD Providers Criticized Over Fees, Transparency
The FCA noted that some firms had adopted good practices,
such as simplifying fee structures and restricting access for investors
unlikely to bear losses.
However, the review identified areas requiring improvement.
Firms were found to be failing to consider consumer complaints or satisfaction
when assessing fair value. Some had made little or no changes to products or
services in response to the Consumer Duty.
The review also highlighted issues with overnight funding
charges. Some firms applied varying levels without clear justification, and
disclosure of potentially significant costs was inadequate.
Certain providers charged overnight funding separately on
matched long and short positions, resulting in ongoing charges with limited
benefit to consumers.
CFD Providers Must Improve, FCA States
The FCA said it would engage directly with firms included in
the review to drive improvements. It will also consider further work to address
identified issues and take action against firms or individuals that fail to
meet required standards.
Francis added: “CFDs are complex, risky products and it
is vital that providers act to deliver good outcomes for customers, communicate
clearly and provide fair value.”
He further noted: “It is also important that consumers
shop around and ensure they fully understand the investment and its
costs.”
This article was written by Tareq Sikder at www.financemagnates.com.
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