The FCA recently warned investors about trading Contracts for Difference (CFDs). When investors use overseas or unregulated providers, they risk losing key protections. The regulator also highlighted poor conduct, weak onboarding controls, and aggressive marketing behaviours, specifically where investors are being targeted by online finfluencers.
Read the announcement: https://www.fca.org.uk/news/press-releases/fca-warns-investors-cfds-risk-losing-out-protections
Growing regulatory focus
We expect continued scrutiny of CFD firms and intermediaries. Firms must ensure onboarding, categorisation, appropriateness testing, financial promotions, and execution‑only frameworks remain effective. There are clear lessons to learn. Many firms still underestimate regulatory expectations, particularly where clients are opted‑up from retail to elective professional status.
Investor harm in focus
The FCA continues to prioritise fair value, client understanding, and responsible product distribution. You cannot rely on legacy processes or generic disclosures. You must demonstrate your decisions, testing, and outcomes. For example, the FCA highlighted cases where retail clients treat leveraged products like casual trading tools, leading to harm.
Cross‑border risks are rising. Some overseas firms claim to be FCA‑regulated when they are not. We expect further action against misleading promotions and weak oversight and due diligence controls.
What you should do now
Practical actions include:
- Ensure appropriateness of testing remains robust and proportionate to product risk.
- Strengthen client categorisation governance, particularly where clients move from Retail to Professional.
- Confirm that clients clearly understand the protections attached to their category and the implications of any change.
- Review introducer and distribution arrangements to ensure they support compliant onboarding and fair outcomes.
- Refresh Consumer Duty monitoring to evidence good customer outcomes and governance.
- Maintain clear documentation and periodic review of controls, decisions, and oversight.
Execution‑only still carries responsibility
Execution‑only firms do not provide advice. However, they must ensure clients understand risks and have functioning harm‑prevention controls.
Where a client repeatedly fails appropriateness tests, firms should not simply allow continued trading after a warning. The FCA expects judgement, challenges, and escalation.
Wider read‑across beyond CFDs
Although the FCA communication focused on CFDs, the lessons apply across other leveraged or higher‑risk products such as:
- Spread bets
- Options and futures
- Rolling spot FX
- Structured products
- High‑risk crypto‑derivatives
How we help
As regulatory expectations evolve, firms that act early will be best placed to protect customers, manage regulatory risk, and support growth. We help firms translate the FCA’s expectations into proportionate, commercial, and effective solutions. We can support with:
- Appropriateness and knowledge assessment frameworks
- Consumer Duty alignment
- Financial promotion and marketing approvals
- Governance and policy enhancements
- Training programmes
- Board MI and control testing
- Horizon scanning and regulatory risk assessments
- CFD Control Health Check for firms looking to benchmark their approach.
- Training programmes (Explore our range of courses here at https://leamancrellin.co.uk/training )
Visit our online shop for ready-to-use compliance toolkits, templates and checklists https://lcdirect.co.uk
Final thought
Regulatory scrutiny will remain high for CFD firms and other firms offering leveraged or complex retail products. Strong governance, challenge and demonstrable client understanding are now essential. The key lessons to be learned are clear: strengthen controls, document decisions, and take a proactive approach to oversight. Doing so supports regulatory confidence, client protection, and sustainable business growth.
Speak with one of our experienced team to explore how we can support you: https://leamancrellin.co.uk/contact-us/
