Clients that are accepting advice from brokers and introducing brokers (IBs) might be posing risks to the European operations of retail brokers. This morning the FCA highlighted a number of issues that some distributors are violating when securing new client accounts for brokers.
The review of the industry which the FCA has undertaken is challenging a key on-boarding aspect for the industry. According to the regulator, IBs are frequently misrepresenting risks and giving clients advice on what positions to take on the market.
According to the study, about 76 percent of clients of retail forex and CFDs brokers are losing money, which is seen by the regulator as a worrying trend.
IG Group Official Response
Hours after the publication, IG Group, the biggest retail broker in the UK, issued a statement that outlined the company’s conduct when it comes to IBs. According to the letter, the brokerage is receptive to the review that the FCA has conducted over the industry.
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In agreement with the regulator, IG Group states: “IG does not offer advisory or discretionary services for CFD products and has terminated its very small number of relationships with distributors who offer our CFD product on a discretionary or advisory basis to retail clients within the UK and EU.”
“IG believes that it complies with the applicable rules and FCA guidance and that this review has no new financial implications for IG’s business,” the company reassures its shareholders.
Continuing its official response, the company is encouraging the regulator to undertake a more thorough review of industry participants that are not in compliance with existing regulations. The company states that any such action will result in better client outcomes in the industry.
“In line with RPPD and MiFID II product governance obligations, IG has carefully defined its target market. This is shared with the few partners with whom IG works, and who distribute its products in accordance with IG’s own high standards,” the company elaborates.
IG Group proceeds by stating that it is focusing on “sustainable business” and is once again urging “robust supervision”. The key drivers to improve client outcomes are appropriate marketing and selective acceptance of clients.