Norway regulator reports Norwegian CFD brokers inspection details

Norway financial regulator has published Norwegian CFD brokers inspection details. The document notes that the CFD products' trading involves high risk. 

16 June, AtoZForex Norwegian financial markets regulator, Finanstilsynet, has published the results of its supervisory activities of the CFD brokers market. The report from the regulator features the statistics from the past couple of years. Apparently, the Norway watchdog has been quite persistent in targeting the unregulated entities.

Norwegian CFD brokers inspection details

Norway has also joined forces with the global regulators in the attempt to reduce risks associated with contracts for difference (CFDs) trading. The report from the Finanstilsynet highlighted the key oversight facts of CFD brokers in Norway. Specifically, the regulator stated that it has carried out the on-site examination of six firms that are mainly involved with CFD trading. The regulatory checks have exposed few serious cases of violation of the Securities Trading Act’s Code of Good Practice.

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As a result of the on-site inspections, the regulator has ultimately suspended the trading licenses of four of the six firms under the scrutiny. Such cases involved the local inspections, where Finanstilsynet has revised the trading results of firms’ clients. The supervisory check has covered about 1,000 clients that were trading CFDs in the period of one to two years.

Also, the regulator has revealed that 82% of these traders have lost the money. The average loss accounted for approximately 55% of the customer’s equity.

The Norway regulator stated that the key reason for license suspension was the firms’ role for short-term and loss-causing CFD trading. The most serious breaches have included misleading marketing and providing insufficient information about the involved risk. Moreover, the CFD brokers, who lost the licenses, were improperly evaluating the suitability of the product or trading strategy for their clients.

FCA CFDs leverage limits 

The Finanstilsynet’s findings resemble the report by the UK Financial Conduct Authority (FCA). The document from the UK watchdog proposed a more stringent framework in relation to the firms selling CFDs products to retail customers. The regulator took this initiative in order to advance norms across the financial sector in the UK.

On the 6th of December, AtoZForex reported that the UK regulator has noticed an increase in the number of firms in the CFD market. FCA is concerned that more retail clients are trading CFD products, while not understanding these products appropriately.

Additionally, FCA highlights that it has carried out the analysis in regards to the clients accounts for CFD companies. The regulator has found out that 82% of clients have lost funds while trading these products.

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