Norway’s financial regulator reports of revoking licenses of four CFD brokers over law violations

Maria Nikolova

Over the last two years, the regulator conducted on-site inspections at six CFD brokers and took away four licenses as a result of law violations it found.

Norway has joined the growing list of jurisdictions voicing their concerns about the risks associated with contracts for difference (CFDs) trading.

On Wednesday, Norway’s financial supervision authority Finanstilsynet published the results of its oversight of CFD brokers during the past couple of years.

During the last two years, the regulator has carried out on-site inspections of six securities companies whose main activities are within CFD trading. The inspections have revealed several serious cases of breach of the Securities Trading Act’s Code of Good Practice, and the licenses of four of the six companies have been revoked as a result of these violations.

In these cases, the main reason for the loss of the licenses has been the companies’ role for short-term and loss-making CFD trading. The most serious violations include misleading marketing, providing insufficient information about risk, as well as inadequate assessments of the suitability of the product / strategy for the particular customer.

As part of these local inspections, Finanstilsynet has reviewed the business customers’ trade results. The check covered approximately 1,000 customers who traded CFDs from one to two years. Finanstilsynet found that 82% of these traders lost money, with the average loss corresponding to circa 55% of the customer’s equity.

These findings are similar to those published by the UK Financial Conduct Authority (FCA), which is seeking to reform the regulations for offering CFDs to retail investors. The FCA’s analysis of a representative sample of client accounts for CFD firms found that 82% of clients lost money on these products.

The Central Bank of Ireland is also pushing for enhanced protection of clients of CFD brokers. The regulator is currently examining two main ways of approaching the matter: the prohibition of the sale or distribution of CFDs to retail clients in and from Ireland, or the implementation of beefed-up investor protection measures. The latter option involves detailed risk disclosures, negative balance protection, as well as introducing a strict leverage limit.

Read this next

Institutional FX

FXSpotStream volumes hit 14-month high in November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2023, which moved higher on a monthly basis.

Digital Assets

Circle denies ties with Palestinian groups, TRON founder

Stablecoin issuer Circle has denied allegations that it facilitates funding for terrorist organizations.

Retail FX

CySEC hits operator of Titanedge, TradeEU with €90,000 fine

The Cyprus Securities and Exchange Commission (CySEC) announced that it has imposed a fine of €90,000 on Titanedge Securities Ltd due to shortcomings in their regulatory obligations.

Institutional FX

Cboe FX volumes retreats slightly in November 2023

Cboe’s institutional spot FX platform today announced its trading volume for the month ending November 2023, which took a step back after a strong rebound in October.

Institutional FX

Alpha Group seals Cobase majority acquisition

Foreign exchange service provider Alpha Group International plc (AIM: ALPH) has finalized its acquisition of Financial Transaction Services, operating as Cobase.

Digital Assets

TMNG Tokens Successfully Listed on MEXC Crypto Exchange

TMN Global proudly announces the successful listing of its native TMNG token on the MEXC crypto exchange, effective December 1st, 2023. This strategic partnership marks a significant milestone for TMN Global in the crypto space.

Institutional FX

Marex completes acquisition of TD Cowen’s PB business

London-headquartered commodities broker Marex has completed the acquisition of TD Cowen’s prime brokerage and outsourced trading business, which will be integrated into Marex’s capital market division. This division was established following the acquisition of ED&F Man Capital Markets in 2022.

Digital Assets

Talos introduces decentralized liquidity and onchain settlement with Uniswap and Fireblocks

“At the cornerstone of the DeFi ecosystem, Uniswap has the breadth of assets and depth of liquidity that institutional traders need. And to have this partnership powered by Fireblocks, a digital assets infrastructure provider trusted by some of the most renowned institutions, is very fitting.”

Digital Assets

FINMA-regulated crypto bank SEBA Bank rebrands to AMINA

“As we look forward to 2024, our ambition is to accelerate the growth of our strategic hubs in Switzerland, Hong Kong, and Abu Dhabi, and to continue our global expansion, building on all the successes we have laid down over the past years.”