UK regulator warns CFD firms against failing consumers

LONDON (Reuters) -Britain's Financial Conduct Authority will take action against contracts for difference (CFD) providers that fail to provide fair value to consumers, two years after introducing stricter protection rules, the regulator said on Thursday.

After a review, the FCA said some providers of CFDs - risky and complex financial products used to bet on the price of a share or asset without owning it - had made little or no change to products or services since the Consumer Duty imposed stricter standards in 2023.

Some did not take consumer complaints or satisfaction into account as part of fair value assessments, and applied overnight funding charges without clear justification and adequate disclosure with little benefit to consumers, it added.

"The Consumer Duty raises the bar for consumer protection across financial services, and CFD providers must meet those standards," Mark Francis, director of sell-side markets at the FCA, said after a review.

CFD providers manufacture over-the-counter derivatives and sell them directly to investors, allowing them to decide the overall price paid by retail traders.

The FCA restricted retail CFD sales in 2019 and warned investors in October against bowing to pressure from firms to claim they were professional clients, which raises leverage limits and risks client loss protections.

The Consumer Duty requires firms to put their customers first by ensuring communications can be understood, and products and services meet their needs and offer fair value.

(Reporting by Kirstin Ridley in London, Yamini Kalia in Bengaluru; Editing by Shailesh Kuber and Jan Harvey)