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CFD Trading – Contract For Differences

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What is CFD Trading?

CFD stands for Contract For Differences and they are a form of derivative trading. CFD trading is extremely complex and high-risk. It is not suitable for everyday retail investors.

CFD Trading

 

What is a CFD?

CFD trading is typically a short term agreement where you invest in the value of a particular asset. In an ideal world you would make an investment into an asset, it would increase in value and you would then sell, walking away with a profit. A return on your investment is dependent on the asset increasing in value.

 

It should also be noted with a CFD that an investor never actually owns the asset, you are in essence betting on its value increasing. CFD trades are available on thousands of products including shares, indices, currencies, commodities, interest rates and bonds.

What are the problems with CFDs?

Due to their complex and high-risk nature, CFDs should only be offered to sophisticated investors and those who can afford to lose their investment. The FCA is addressing concerns about the risks associated with CFDs and the poor conduct of the firms selling them. Thousands of individuals have been exposed to significant losses when trading in CFDs.

76% of retail customers who bought CFD products on either an advisory or discretionary basis lost money over the twelve-month period being reviewed by the FCA.

What is the FCA proposing?

The FCA is proposing rules to address harm to retail consumers from the sale of complex derivative products.

The rules would apply to firms acting in or from the UK and will:

  1. Ban the sale, marketing and distribution of binary options to retail consumers
  2. Restrict the sale, marketing and distribution of contracts for difference (CFDs) and similar products to retail customers

The FCA estimates that the above proposals to restrict the trading of CFDs could reduce annual losses for retail consumers of UK firms by between £267.4m to £450.7m.[ii]

The FCA has said it wants to ensure that firms:

  • Deliver CFD products to the intended target market, and
  • Pay due regard to the interests of customers and treat them fairly

Read the full ‘Dear CEO’ letter by the FCA to CFD providers by clicking on the FCA logo:

FCA

 

How do you know if you have been mis-sold or have received negligent advice?

Here are a few key indicators that you may have a claim:

  • Retail investor – Were you an investor who only held basic investments, such as share and bonds in secure reputable companies or held no investments at all?
  • Contact – Were you contacted out of the blue by a CFD Trading adviser?
  • Knowledge – Did you invest into something that you didn’t really understand? Did you have little or no knowledge of how CFDs worked?
  • Pressure – Did you feel you did not have time to get independent advice, research the investments or take your time to decide if you wanted to proceed? Where you pressurised to act quickly or risk losing out?
  • Risk consideration – Did the adviser fail to explain the risks associated with the investment including the potential of losing your investment?
  • Losses – As a result of the investment have you suffered a financial loss?

If you answered ‘yes’ to any of the above, you may potentially have a claim.

What should I do if I think I have been mis-sold?

Contact Oakwood Solicitors free of charge to find out if you are entitled to compensation on a ‘no-win, no-fee’ basis. We have helped clients to recover tens of thousands of pounds in compensation and may be able to help you too.

Coins

 

How much will it cost you to make a claim?

We will undertake a free investigation into your investment and advice you on whether you have a claim.

  • If we identify that you have a claim and you decide to instruct Oakwood Solicitors to recover your losses, then we will act for you on a no-win, no-fee basis.
  • If we fail to secure you a settlement, you will not be charged.
  • If we successfully recover your compensation, then our legal fees will be 30% (inclusive of VAT) of any compensation you are awarded.

How much compensation will I receive?

We cannot provide an exact figure until we have completed our investigation, as your loss will be dependent on the amount invested and the nature of the investment.

Oakwood Solicitors Ltd

 

Why should I choose Oakwood Solicitors?

You will have a dedicated adviser who will see your claim through from start to finish, assisting you in the event of any queries or issues you may have. Your case-handler will also continue to provide regular updates until the conclusion of your claim, ensuring the process is as stress-free and effortless as possible.

WHAT TO DO NEXT

If you believe or feel you have a claim, contact us for a free initial consultation regarding your options by email at enquiries@oakwoodsolicitors.co.uk, or alternatively, call us on 0113 200 9787.

 

[i] https://www.ig.com/uk/cfd-trading/what-is-cfd-trading-how-does-it-work

[ii] https://www.fca.org.uk/news/press-releases/fca-proposes-permanent-measures-retail-cfds-and-binary-options

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Danielle Lightfoot

Solicitor and Head of Financial Litigation

0113 200 9740

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