Tag Archives: CFDs

FCA stops FXVC offering CFDs to UK customers

The FCA has acted to stop a Cypriot based firm, Finteractive Limited (trading as FXVC), from offering high risk contracts for difference (CFDs) to UK investors.

FXVC used a variety of inappropriate techniques, including misleading financial promotions which appeared to offer consumers the opportunity to purchase shares in a well-known company and failed to mention that they were actually promoting CFDs.

Many of the FXVC’s customers were unclear about the nature of the investments that they were being persuaded to make and the risks involved in trading in CFDs. The firm used pressure tactics, described by one customer as ‘relentless’, to encourage consumers to invest ever increasing sums of money. Some customers were even encouraged to declare they were professional investors despite not meeting the necessary criteria for such categorisation.

The FCA has stopped FXVC conducting any regulated activities in the UK and required the firm to close all trading positions and return the money to customers.

FXVC operates in the UK under the Temporary Permission Regime (TPR) put in place for firms who used to operate in the UK under a passport and who wish to continue to operate here following the UK’s exit from the European Union. These firms operate under the TPR until their application for full authorisation by the FCA can be considered.

ASIC’s CFD product intervention order takes effect

ASIC’s product intervention order imposing conditions on the issue and distribution of contracts for difference (CFDs) to retail clients takes effect from today.

The order strengthens protections for retail clients trading CFDs after ASIC found that CFDs have resulted in, and are likely to result in, significant detriment to retail clients.

ASIC’s order reduces CFD leverage available to retail clients and targets CFD product features and sales practices that amplify retail clients’ CFD losses, such as providing inducements to become a client or to trade. It also brings Australian practice into line with protections in force in comparable markets elsewhere.

The maximum CFD leverage available to retail clients will range from 30:1 to a 2:1, depending on the underlying asset class. Before now, a retail investor’s CFD exposure could be as much as 500 times their original outlay.

ASIC Commissioner Cathie Armour said ‘We will closely monitor compliance with the product intervention order and won’t hestitate to take appropriate action to enforce the order.’

‘We are also paying careful attention to changes in CFD providers’ reported holdings of retail client money and any mis-classification of retail clients as wholesale clients, which would risk denying them important rights and protections. Protecting retail investors from harm, particularly at a time of heightened vulnerability, is a priority for ASIC,’ Commissioner Armour said.

The maximum penalty for a contravention of a product intervention order is five years’ imprisonment for individuals and substantial pecuniary penalties of up to $555 million for corporations.

If a court finds that a person has contravened a product intervention order, a retail client may recover the amount of loss or damage suffered because of the contravention.

The product intervention order will remain in force for 18 months, after which it may be extended or made permanent.

Background

A CFD is a leveraged derivative contract that allows a client to speculate in the change in value of an underlying asset, such as foreign exchange rates, stock market indices, single equities, commodities or cryptoassets.

Regulatory Guide 272 Product intervention power provides an overview of ASIC’s product intervention power, when and how ASIC may exercise the power, and how a product intervention order is made.

On 22 August 2019, ASIC released Consultation Paper 322 Product intervention: OTC binary options and CFDs (CP 322) seeking feedback on proposals to use its product intervention power to address significant detriment to retail clients resulting from over-the-counter (OTC) binary options and CFDs (refer 19-220MR). CP 322 attracted over 400 responses from consumers, consumer groups, product issuers, industry bodies and other stakeholders.

On 23 October 2020, ASIC made a product intervention order imposing conditions on the issue and distribution of contracts for difference (CFDs) to retail clients (refer 20-254MR).

In addition to the product intervention order, ASIC’s actions to address concerns about CFDs include:

  • enforcement action to address misconduct (for example, refer 21-051MR20-246MR, and 20-161MR)
  • public warning notices and other statements
  • surveillance projects and thematic reviews
  • stronger regulations
  • extensive retail client education campaigns and guidance for binary option issuers.

More information about ASIC’s supervision and enforcement work is available on our website. ASIC’s MoneySmart website has further information about forex trading and CFDs.

ASIC’s proposal in CP 322 to ban the issue and distribution of binary options to retail clients is still under consideration and a decision has not yet been made.

Technical Analysis GBPUSD 9-8

Technical Analysis GBPUSD 9-8

GBPUSD made a break of the 100 hour MA to the downside and is moving away. The next target comes below 1.33 at 1.3296 which is the 38.2% of the move up from the August 29th low. The 1.3250 area is a confluence area where the 50% retracement, 200 hour MA and the low from Sept 2 all come together. The first support comes at 1.3309 and the second at 1.3296.

Resistance 1: 1.3357

Resistance 2: 1.3382

Resistance 3: 1.3405

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