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Regulator targets Spread Betting Firms following review

4th February 2016

Earlier this week the regulator issued a rare ‘Dear CEO’ letter to a number of CFD firms and Spread Betting providers warning those within the sector to review their processes.

This was in response to a FCA regulatory review of a sample of CFD firms, the results of which found poor controls over information and due diligence along with inadequate customer assessments common place.

Read more on the FCA’s findings here:

CFD Firms to Review Client On-boarding following Dear CEO Letter

The FCA’s most recent scrutiny of the CFD industry seems congruent to an investigation previously conducted by the Bank of Ireland back in 2011 when four CFD and spread betting companies were also found to have inadequate procedures in place.

Following the regulator’s warning and concerns, CEO’s of CFD and Spread Betting Firms should now prepare to review their firms’ processes to ensure they fully comply with their regulatory requirements.

If your firm offers clients Contracts for Differences (CFDs) including Spread Bets and Rolling Spot Forex and would like any assistance in reviewing your existing procedures please contact our experienced Compliance Consultants for a free no obligation chat.

More about CFDs: What is Spread Betting?

Unlike other forms of betting, such as sports betting, Spread Betting is a recognised as an investment under the Financial Services and Markets Act 2000 and is a type of Contract for Difference (CFD).

CFDs and Spread Bets offer investors the prospect of very high returns on investment, however they are seen by the regulator to carry a higher level of risk.

With more traditional gambling, the person placing the bet only risks losing their initial bet. However with CFDs the investor is able to lose more than their original investment and as such Spread Betting is seen to carry a higher level of risk compared in comparison to other forms of betting.

Contracts for Difference, or CFDs are a way to wager upon movements in price without actually taking ownership of a particular share (that would result in stamp duties).

A Contract for Difference, or CFD, is a contract between an investor and a business. One the contract concludes, the investor receives the difference between the opening and closing price of an asset. If the difference is negative, then the investor will have to pay the difference.

Spread betting however, allows an investor to speculate on markets and thus make profits or losses based upon their investment and how much the price may move.

Spread Betting Providers under Regulatory Scrutiny