Contract for difference?

I’m going to be blunt. If you come across a Contract for Difference (CFD) or more accurately someone trying to sell you one, run.

A CFD is a highly complex financial instrument. I’m not going to bore you with the detail. You can see it here if you wish: https://www.investopedia.com/terms/c/contractfordifferences.asp. Anyway, as is often the case, a man in a smart suit or sounding like he probably owns several of them from Savile Row (showing my age) is to be avoided. For good measure, I’d suggest that Forex (foreign exchange trading) when combined with ‘investment advice’ would also be best left well alone. Unless of course you quite like losing your life savings – which I know you don’t.

So, with the regularity of a tax year, news of yet another FCA fine to such a shark graces my inbox. This time the fine was slashed by over 75% from £1,215,000 to just £276,100 (well it is ‘just’ for a firm like that). The firm being Forex TB Limited (FXTB). This is for giving investment advice when they have no permission or right to do so. The fine was slashed as it would mean FXTB would face financial hardship. I would have thought the sector would be better off without an unauthorised firm quite obviously not giving a fig about the rules. I certainly don’t wonder why my regulatory fees rise each year when the fines for the culprits are soft. Still, at least they don’t have a license and have held no FCA permissions since last October. What a relief.

FXTB appear to have been fairly standard financial crooks, at least that is my reading of the FCA statement, which I quote:

“FXTB pressured customers to put their money at risk through CFD trading, even encouraging them to borrow money from friends or family in some cases.

Compounding these failings, FXTB frequently provided its customers with investment advice, despite not being authorised to do so.

FXTB’s customers were inexperienced in trading and did not always understand the risks associated with CFDs, which were also not fully explained to them. FXTB also enabled customers to become ‘Professional Clients’ by encouraging them to provide false information. This meant these consumers lost the protections that as ‘retail clients’ they would have had.”

In short, there is enough risk and return available in normal mainstream investment funds without going off-piste into really nuanced trading techniques, and yes before you ask, I would include cryptocurrency in the same category until further notice.

You can read the full FCA statement here: https://www.fca.org.uk/news/press-releases/fca-fines-fxtb-unfair-customer-treatment-practices

OK, so you wouldn’t fall for this, after all you pay us to advise you – but what about your friends, family and peers; you know the ones you worry about that might very well get sucked into this sort of stuff. Introduce us.