UK FCA warns retail investors of risks in CFDs trading

The UK Financial Conduct Authority (FCA) has issued a warning to investors regarding contracts for difference (CFDs), a type of derivative that allows speculation on the price movement of shares or assets without owning the underlying asset. The FCA expresses concern that some firms are using high-pressure tactics to encourage investors to self-certify as professional clients, which thereby removes key retail consumer protections, potentially exposing individuals to losses beyond their financial capacity.

The regulator also raises concerns about the role of social media influencers in promoting offshore firms and unrealistic returns, often without disclosing that such firms are unregulated. The FCA reminds firms that they must not push elective professional or redirection promotions onto their retail clients, otherwise it will take action against firms who breach its rules. The FCA also reiterates its commitment to targeting "finfluencers" who unlawfully promote financial products and services. Firms are also reminded of their obligations under the consumer duty and investors are encouraged to use the FCA's InvestSmart tools to support informed decision-making with their investments.

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