The FCA has shared concerns that firms are using high pressure techniques to encourage investors in Contracts for Difference (CFD) products to claim they are professional clients.

Stating they are professional clients put investors at risk of losing more money than they can afford by giving up retail client protections, the regulator said.

According to the FCA, retail client protections, including leverage limits and client loss protections, prevent nearly 400,000 people a year from risking more than their original stake in CFDs and provide between £267m and £451m worth of protection.

CFDs are a way to bet on the price of a share or asset moving up or down without owning it.

The regulator restricted any sales of CFDs to retail customers from 2019.

The regulator has also found that investors are being targeted by 'finfluencers' (social media influencers) who may not make it clear that they are promoting unregulated firms operating offshore.

It said some of these finfluencers promise consumers unrealistic returns if they copy trades, invest in managed accounts or pay for daily trading tips. Over 90,000 people have lost around £75m over a 4-year period in this way at just one firm. 

The FCA reminded firms that they must not push elective professional or redirection promotions onto retail clients and that it will take action against firms breaking the rules.

Under the Consumer Duty, customers should only receive communications they understand about products and services that meet their needs and offer fair value.

Mark Francis, director of sell-side markets at the FCA, said: “CFDs are complex, high-risk products. The protections given to retail investors under our rules save UK consumers millions each year. We are concerned that some firms are trying to get people to invest more than they can afford to lose.” 

The regulator added that it will soon launch a consultation on client categorisation to ensure the right protections apply for the consumers who need them and create more freedom for those professional investors who do not.