The FCA has fined Cypriot contract for differences (CFD) firm Forex TB Limited (FXTB) £276,100 for failing to treat its customers fairly, and for providing investment advice without being authorised to do so.
CFDs are complex leveraged financial products used to speculate on the movement in prices on a wide range of assets. As a result, they carry a considerable risk of substantial losses.
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.
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.
Therese Chambers, joint Executive Director of Enforcement and Market Oversight at the FCA said:
'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.'
The FCA would have imposed a fine of £1.215m, however FXTB demonstrated that this would cause it serious financial hardship.
Notes to editors
- Final Notice: Forex TB Limited (PDF)
- FXTB also traded as Patron FX.
- The FCA encourages any customer of FXTB who believes they experienced behaviour as set out in the Final Notice to make a complaint to FXTB as a means of seeking compensation.
- The FCA has previously taken action in 2020 to stop 4 Cypriot investment firms from continuing to offer high risk CFDs to UK investors. Moreover, the FCA stopped the UK operations of a further 16 CFD providers that had entered the UK’s temporary permissions regime in 2021.
- In the context of CFDs, a client opting up to Professional Client status is able to trade on higher leverage / put up less margin to support a position of a given size. This increases potential profits but also potential losses. Clients moving to Professional Client status waive some protections afforded to retail clients.
- FCA’s Dear CEO letter focused on client take-on in firms offering CFDs.
- FCA’s second Dear CEO letter focused on the responsibilities of providers and distributors of CFD products on an advisory or discretionary basis.
- Consultation Paper: Enhancing conduct of business rules for firms providing contract for difference products to retail clients.
- Statement on Binary Options: FCA confirms permanent ban on the sale of binary options to retail consumers.
- Policy Statement: Finalised rules restricting how CFDs and CFD-like options are sold, marketed, and distributed to retail consumers.
- Find out more information about the FCA.