UK CFD brokers fail with regard to appropriateness assessments – FCA review

Maria Nikolova

CFD firms continue to fail with regard to risk warnings and assessments of prospective clients’ knowledge, according to the UK regulator.

The UK Financial Conduct Authority (FCA) is apparently focused on the CFD industry today. Earlier, it announced a delay in making final its conduct rules for the sector. Adding to that, the regulator published the findings from a review of appropriateness assessments for sales of CFD products, which covered a sample of 23 firms.

The findings highlight several particular areas of concern regarding the way CFD firms assess the appropriateness of their clients to trade CFDs.

  • Evaluation of prospective clients’ knowledge

The FCA review found a reliance on irrelevant or unsupported information in assessments. A firm’s assessment questions should seek to obtain from the client relevant information about the client’s knowledge and experience.

A particular point of concern identified relates to assessment questions which ask applicants to confirm that they have attended a seminar or course about CFDs, or whether they have used a demonstration platform to gain “experience”. The problem is that such an assessment of appropriateness gives undue weight to these factors.

  • Inadequate risk warnings

In case potential clients fail the appropriateness test, they should get a risk warning. When presenting a risk warning, applicants should not be asked to confirm an intention to proceed with a transaction as the next step in the application process. The FCA review found that where prospective clients fail the appropriateness assessment, but can easily override the risk warning and proceed to open an account, a high proportion of clients proceed to enter into CFD transactions.

  • Failed applicants

In most cases, firms did not give substantial consideration to whether an applicant who fails the appropriateness assessment (and receive a risk warning) should still be allowed to proceed. This permitted prospective clients to override the appropriateness assessment and risk warning and proceed to trade without substantive deliberation.

The FCA warns that by doing this, some firms may be failing to comply with their obligations in relation to customers’ best interests.

  • Oversight failures

The FCA review found firms lacking evidence of board minutes or contemporaneous notes of senior management discussions. These are compliance failures too.

  • Future action

The FCA is concerned that CFDs are “reaching a wider target market than is likely appropriate”. The regulator will consider enforcement investigations or other action as appropriate, including in relation to firms that were included in the review.

Read this next

Technical Analysis

FTSE 100 Technical Analysis Report 16 April, 2024

FTSE 100 index can be expected to fall further toward the next support level 7760.00, former strong resistance from last year, acting as the support after it was broken this January.

Digital Assets

Cyprus keeps FTX EU license suspended until September

The Cyprus Securities and Exchange Commission (CySEC) has extended the suspension of’s CIF license, which allowed the insolvent platform to operate throughout Europe, until September 30, 2024.

Metaverse Gaming NFT

Mon Protocol and Pixelverse Forge a Groundbreaking Partnership to Revolutionize Blockchain Gaming

Mon Protocol and Pixelverse make history in the annals of Blockchain gaming as they set up the architecture for the melding of their technologies.


Nimiq Pay Launch: A New Standard For Self-Custodial Crypto Payments

Nimiq, the blockchain ecosystem for payments that is designed to make cryptocurrency easy for everyone to use, has taken the first concrete steps towards its goal of becoming the world’s most widely-accepted digital asset for payments with the launch of Nimiq Pay.

Inside View, Interviews

Exclusive: GoMining’s Mark Zalan wants to democratize opportunities of Bitcoin halving

As the Bitcoin community counts down to the upcoming Bitcoin halving, Mark Zalan, CEO of GoMining, shared exclusive insights into how the company is gearing up for this pivotal event in the cryptocurrency world.

Digital Assets

Umoja Partners with Merlin Chain to Launch Revolutionary Bitcoin-Based Synthetic Dollar – USDb

Umoja, an innovative smart money protocol, has embarked on a strategic partnership with Merlin Chain, a leading Bitcoin Layer-2 network, to introduce USDb, the first Bitcoin-based, high-yield synthetic dollar.

Crypto Insider

Bybit Report Highlights Imminent Bitcoin Supply Shortage and Rising Scarcity Post-Halving

Bybit, recognized as one of the top three cryptocurrency exchanges globally in terms of trading volume, has recently published a comprehensive report highlighting the future supply constraints of Bitcoin.


BlockDAG Outshines XRP Price Breakout and Uniswap Crypto Forecast with 20,000x ROI Potential and Teaser for Keynote on Moon

BlockDAG has become the latest sensation in the crypto world, which has taken the spotlight by storm, overshadowing even the most optimistic projections for XRP’s price breakout and Uniswap’s crypto forecast.

Digital Assets

Binance announces blockchain courses at European universities

“Education plays a pivotal role in advancing adoption and fostering opportunities as these technologies redefine our future and global economic landscape.”