The FCA has fined Cypriot contract for differences (CFD) firm Forex TB Limited (FXTB) £276,100.

In 2021, FXTB breached:

• Principle 6 of the FCA’s Principles for Businesses by failing to pay due regard to the interests of its customers and treat them fairly; and
• section 20(1) of the Financial Services and Markets Act 2000 by carrying out the regulated activity of advising on investments without the requisite permissions.

The FCA points out that CFDs are complex leveraged financial products used to speculate on the movement in prices on a wide range of assets. This means that they carry a considerable risk of substantial losses. 

According to the FCA, FXTB pressured customers to put their money at risk through CFD trading.  In some cases, it encouraged them to borrow money from friends or family.  It 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 FXTB did not fully explain 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 they should have had as “retail clients”. 

This all led to customers losing significant sums of money. Consumers in the UK lost £4,426,023. 

The FCA considers FXTB’s misconduct was made worse by the fact that it exploited customers who, because of their inexperience, were vulnerable. FXTB risked, and in some cases caused, individual customers to lose substantial amounts of money.

The FCA required FXTB to stop providing services to UK consumers on 12 April 2021. No business in the UK has been conducted by FXTB since this date. From 10 October 2023, FXTB no longer held any FCA permissions. 

The FCA would have imposed a fine of £1.215m.  However, it reduced it as FXTB demonstrated that this would cause it serious financial hardship, perhaps ironic as they had caused customers financial hardship!

In 2020, the FCA also acted against four other Cypriot investment firms who were offering high risk CFDs to UK investors. They also stopped the UK operations of a further 16 CFD providers that had entered the UK’s temporary permissions regime in 2021. 

Fines are all very well, but are there any consumer redress options? If there have been widespread regulatory failings by a business, the FCA may require it to enter a consumer redress scheme. This will include a set of rules that the business must follow when compensating its customers for a specific issue.  In this case, FXTB has already paid compensation to the relevant consumers.