Regulators raise concerns over CFD firms

Regulators have raised concerns over compliance at some contracts for difference (CFD) and financial spread betting firms operating in Ireland.

The Central Bank said it had examined firms’ compliance with certain conduct of business requirements of Markets in Financial Instruments Directive (MiFID) regulations, such as procedures for accepting clients and the quality of information provided to clients.

The inspection forund that some of the investment firms were failing to fully inform consumers of the risks that CFD and financial spread betting carries. Other breaches included failing to inform clients if products were not appropriate for them, and misleading marketing material that failed to balance the benefits with risks.

The inspection looked at four firms, and covered about 80 files. However, none of the firms were fully compliant with the regulations. Although some were found to have less serious breaches, others had a particularly low level of compliance.

“Consumers need to be made fully aware of the complexity and very high risks of CFD and financial spread betting before making investment decisions,” said head of consumer protection Sharon Donnery. “Losses can be substantial and people should know what they are getting into.”

The Central Bank is considering enforcement activities, it said.