Business Irish

Monday 11 December 2017

Pan Index fined €40,000 by Central Bank over CFD trading policy


John Mulligan

Spread betting firm Pan Index has been fined €40,000 by the Central Bank after it failed to ascertain whether clients were sufficiently knowledgeable about complicated contracts-for-difference (CFD) trading before they were allowed sign up for the service.

The Central Bank said it was also fining Pan Index -- which closed in July -- for failing to assess whether the spread trading services sought by a client were in fact appropriate to that client.

Pan Index was reprimanded by the Central Bank and ordered to pay the €40,000 fine.

The two breaches of regulations by Pan Index were detected by the Central Bank in March this year during the course of what it said was a "themed inspection" of contracts for difference and financial spread betting firms.

The institution warned firms this summer that consumers needed to be made "fully aware of the complexity and very high risks of CFD and financial spread betting before making investment decisions".

CFDs enable individuals to build positions in stockmarket-listed companies without actually owning shares in the companies.

They are highly leveraged instruments and they enable the owner of them to gain a bigger exposure to an equity without a large corresponding outlay.


However, because of their leveraged nature, investors can suffer very large losses, or enjoy significant gains, depending on how the underlying share price moves.

"The penalty imposed in this case reflects the seriousness with which the Central Bank views the obligation of firms to obtain the required information from clients or potential clients in relation to their knowledge or experience, and to take that information into account in assessing whether an investment service or product is appropriate for those clients," added the Central Bank.

It noted that the breaches detected at Pan Index are no longer continuing and the firm had readily co-operated in the investigation.

CFDs were famously used by businessman Sean Quinn to amass a 25pc interest in Anglo Irish Bank.

That move precipitated his financial unravelling and lead to the controversial 'Golden Circle' of developers and investors that were persuaded by the bank to buy part of Mr Quinn's holding after he was forced to convert his CFDs into an actual stake in the bank.

Irish Independent

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