The UK financial regulator FCA has issued an interesting warning to people investing in Contracts for Difference (CFDs), urging them not to abandon vital FCA consumer protections when they are defined as ‘retail’ traders.
The regulator added that in the coming months, the FCA will launch a consultation on client categorization to ensure the right protections are in place for consumers who need them and create more freedom for those professional investors who don’t.
High pressure techniques
CFDs are a way to bet on the price of a share or asset moving up or down without owning it. The FCA is concerned about this CFD brokers use high pressure techniques to encourage investors to claim to be professional clientsputting them at risk of losing more money than they can afford.
The FCA noted that some firms promote retail clients to optional professional investor categorization. Client funds may be moved from segregated client money accounts, exposing the client to a greater risk of loss in the event of the company’s failure. Other companies are redirecting retail clients to affiliated CFD providers in third country (ie offshore) jurisdictions;without equivalent consumer protection.
FCA’s retail client protections, including leverage limits and client loss protection, prevent almost 400,000 people a year from risking more than their initial stake in CFDs and provide between £267m and £451m worth of protection.
Nice influences
The FCA also found that investors are being targeted by finnfluencers, who may not make it clear that they are promoting unregulated companies operating offshore. Some of these finfluencers promise consumers unrealistic returns if they copy trade, invest in managed accounts or pay for daily trading tips. More than 90,000 people lost around £75 million over a 4 year period this way to just one company.
Companies must not promote optional business offers or redirect promotions to their retail customers. The FCA will take action against companies that break the rules. The FCA will continue to target fininfluencers who illegally advertise financial services products.
In June 2025, the FCA led an international crackdown on illegal fininfluencers which resulted in 3 arrests, 7 cease and desist letters and 50 warning notices being issued.
Mark Francis, FCA’s sales director of purchasing, said:
“CFDs are complex, high-risk products. The protections afforded to retail investors under our rules save millions of UK consumers. We are concerned that some firms are trying to get people to invest more than they can afford to lose. Investors should be very wary of CFD firms that try to circumvent our rules in this way, and those on social media that look too good to invest.”
According to the Consumer Duty, consumers should receive communications they understand and products and services that meet their needs and offer fair value. The FCA’s InvestSmart campaign has useful tools to help people make more informed investment decisions.