As part of a long-running effort to combat abuse by offshore contracts for difference (CFDs) trading firms, the U.K.’s Financial Conduct Authority (FCA) has sanctioned a firm — one that had already been banned — for harming retail investors.
The FCA imposed a £276,100 fine on Cyprus-based Forex TB Ltd. (FXTB) for failing to treat its customers fairly, and for providing unregistered investment advice back in 2021 when the firm was ordered to stop serving customers in the U.K.
According to the FCA, FXTB pressured customers to engage in risky CFD trading, even encouraging them to borrow money to trade. It also frequently provided advice, without being registered to do so.
The FCA said the firm enabled its often-inexperienced retail clients to become classified as “professional clients” by encouraging those clients to provide false information. The designation “professional” meant these investors could trade with greater leverage, but it also meant they lost certain protections that would have applied if they were classified as retail clients.
Those protections — which include measures to limit losses and ensure adequate risk disclosure — were introduced in 2019, amid regulators’ concerns about the suitability of CFD trading for retail investors.
“FXTB’s misconduct was particularly egregious since it relied on the exploitation of customers who, because of their inexperience, were particularly vulnerable. By intervening early in April 2021, we helped prevent further consumer losses,” said Therese Chambers, joint executive director of enforcement and market oversight at the FCA, in a release.
Despite the early intervention, investors still lost over £4.4 million in trading with the firm in 2021, the FCA said in its enforcement notice.
Back in 2020, the FCA took action against several Cypriot CFD trading firms. In 2021, it shut down 16 more CFD firms in the U.K.
The FCA noted it considered imposing a £1.74 million fine on the firm — and that it would have reduced that to £1.2 million if the firm agreed to settle the regulator’s charges — but “FXTB demonstrated that this would cause it serious financial hardship.”