The UK’s Financial Conduct Authority has issued a warning to investors in Contracts for Difference, urging them not to give up key consumer protections. CFDs allow investors to speculate on the price of a share or asset without actually owning it.

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The regulator highlighted risks from social media influencers, or “finfluencers,” promoting unregulated offshore firms. Some promise unrealistic returns for copying trades, investing in managed accounts, or paying for daily trading tips. At one firm alone, more than 90,000 people lost about £75 million over four years.

High-Pressure Tactics Risk Client Funds

The FCA said some firms use high-pressure tactics to persuade clients to claim professional status. This can expose investors to larger losses than they can afford.

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Retail protections, including leverage limits and client loss safeguards, prevent nearly 400,000 people each year from risking more than their initial investment. These protections provide between £267 million and £451 million in value.

FCA Targets Firms Misleading Retail Clients

The FCA said firms must not pressure retail clients into professional status or redirect them to other promotions. It will take action against companies that break these rules. The regulator will also continue to target finfluencers offering financial services illegally.

Under the Consumer Duty, the FCA said investors should receive clear communications and access products that meet their needs and offer fair value. Its InvestSmart campaign provides tools and guidance to help consumers make informed decisions.

FCA Blocks Websites, Apps, Finfluencers

The FCA uses data and technology to tackle unauthorized financial promotions, blocking over 1,600 websites and removing more than 50 apps. In 2024, it intervened in almost 20,000 promotions, cancelled 1,500 firm authorisations, and issued 2,240 alerts on unauthorised firms.

Social media “finfluencers” were targeted, with 20 interviewed under caution and 38 alerts issued. Whistleblowing reports informed 908 supervisory actions, mainly on Consumer Duty breaches. Banks were fined over £45.5 million for compliance failures.

Source: Finance Magnates