Central Bank investigation finds investment firms breached rules
Published 16/06/2011 | 11:40
A Central Bank investigation has found that all four investment firms inspected for compliance under EU regulations on spread betting and contracts for difference services were not compliant with the rules.
Spread betting is a risky form of investment which is based on the outcome of an event, for example, whether a share price will rise or fall where the pay off is based on the accuracy of the wager.
Contracts for difference are complicated financial instruments involving a contract between two parties speculating on the movement of an asset/share price.
While none of the firms were indentified, the Central Bank said yesterday it is considering enforcement actions in some cases.
Sharon Donnery, head of consumer protection at the bank, warned that consumers are often unaware of the complexity of these investments.
“Losses can be substantial and people should know what they are getting into,” she said.
“In particular, some of thee investment firms are failing to fully inform and provide adequate warnings to consumers of the risk that CFD and financial spread betting carries before they begin trading.”
In some cases, the firms used misleading marketing materials while others failed to use adequate risk warnings and disclosures, she added.