Yesterday (01/06/2020) the FCA stopped four Cypriot investment firms offering CFDs to UK investors for using fake social media ads to entice CFD clients to sign up. You can read the notices from the FCA for each broker here:
For more information on how to spot CFD scams read our guide to CFD (contracts for difference) scams.
Mark Steward, FCA Executive Director of Enforcement and Market Oversight, said:
‘The FCA has removed passporting rights for these firms which effectively stops them from continuing to provide these types of products in the UK. We welcome the further action taken by the CySEC. The FCA’s investigations into the sector are continuing.’
The FCA’s action was also highlighted in The Times this morning, but even established national press outlets have unwittingly promoted investment scams in the past.
The ban comes after claims these firms directly or indirectly used unauthorised celebrity endorsements on social media to promote CFD trading. The FCA has ordered them to stop selling CFDs to UK customers, to close existing positions with UK customers, to return UK customers’ money and to notify UK customers of the FCA’s action.
The barred firms are entitled to appeal the FCA’s decision and seek a review of the action. However, the FCA states that they estimate that these firms have no presence in the UK, their corporate address as in Cyprus and that UK investors could have lost hundreds of thousands of pounds in these investments.
Using fake celebrity endorsements is not a new thing for financial advertising. These fake adverts circumvent advertising network rules but still manage slip through the net.
What does this mean for the CFD industry?
This is a good thing for UK regulated CFD brokers.
There is a big difference between brokers that responsibly offer CFDs, whose interests are aligned with clients, and those CFD brokers that just exist to rip people off.
There have been big changes in the CFD industry over the past few years. For example, there is less B-booking, the days of churn and burn are over and CFD brokers are looking to expand their investment offering.
When we spoke to June Felix the CEO of IG, she was very keen to highlight the fact that they do not trade against their clients. IG also offers SIPP and investment ISA accounts where clients can hold their long term investment alongside their short term speculative trading.
Commenting on the recent news a spokesperson from IG said:
“IG wholeheartedly welcomes the FCA’s comprehensive action to close down these firms. For many years we have seen UK consumers targeted and harmed by firms based outside of the UK acting poorly and in some instances illegally.”
Find out more about investment scams you need to look out for:
- Financial advertising scam survey results and analysis
- Why you should report scam adverts
- Bond scams – how to avoid them
- Don’t get scammed out of your pension
- How to spot stocks and shares scam
- Cryptocurrency – the scammers playgroud
- The growth of social media scams
Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.