FCA issues warning on 'alternative' CFDs

LONDON (Reuters) – Britain’s Financial Conduct Authority said on Wednesday it would keep a closer eye on firms selling high-risk and speculative investments to retail clients following recent actions by its European peer to supervise sales of contracts for difference (CFDs).

Measures to restrict the sale, marketing and distribution of CFDs to retail clients put forward by the European Securities and Markets Authority (ESMA) apply across the EU from Aug. 1.

The FCA said it was “concerned” that firms may consider getting around ESMA’s measures by selling other similarly complex or highly-leveraged products to retail clients.

The watchdog said it would work with ESMA and other European regulators to monitor and assess the sale of these alternative products and push for further regulation if it found evidence that these products were causing similar harm.

It drew particular attention to one product with comparable features to CFDs, known as Turbo Certificates, which allow investors to make leveraged returns to the upside and the downside of the price of the underlying asset.

“ESMA makes clear that firms “should pay particular attention to the leverage made available to retail clients and consider whether the product is offered on terms that act in the best interests of the client”, the FCA said in a statement.

Reporting By Sinead Cruise; editing by Simon Jessop


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