Tuesday, August 03, 2004

FSA puts out a warning to spread betting firms

FSA warns spread betting firms

The Financial Services Authority (FSA) who's job is to protect investor's interests has put out a letter warning spread betting firms to clean up their act or face heavy fines. Its criticised firms for luring customers with hard-hitting promotions whilst failing to make clear the potential risks of spread betting.

The article, by Helen Loveless of This is Money states:

"Originally, spread betting was the province of City professionals who would bet on the movement of financial markets and currencies. However, in recent years betting on sporting events has become widespread. The recent Euro 2004 soccer tournament is thought to have made spread betting companies millions of pounds.

But as it has become more popular the proportion of inexperienced consumers placing* bets has also risen. Figures show the number of people opening accounts is rising by around 20% a year, with around 80% of those being opened online. " Read More

The FSA is worried that inexperienced investors maybe turning to spread betting without realising the huge risks involved - in other words they can pay out far more then their original stake if the market turns against them.

The FSA confirmed it would be prepared to impose fines on companies that mislead consumers

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