IG Group’s Response to FCA Letter Highlights Issues in the Industry

Clients that are accepting advice from brokers and Introducing Brokers (IBs) Introducing Brokers (IBs) An introducing broker (IBs) represents an entity that is facilitating the relationship between the clients and the broker or futures commission merchants (FCMs). Introducing brokers are generally seeking to provide an added value to the relationship between the parties by offering support or specific services. These may or may not be a subsidiary of the broker.Introducing brokers do not hold client money, execute orders or provide any trade-related services to the clients. In developed markets s An introducing broker (IBs) represents an entity that is facilitating the relationship between the clients and the broker or futures commission merchants (FCMs). Introducing brokers are generally seeking to provide an added value to the relationship between the parties by offering support or specific services. These may or may not be a subsidiary of the broker.Introducing brokers do not hold client money, execute orders or provide any trade-related services to the clients. In developed markets s Read this Term) 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.

Discover credible partners and premium clients at China’s leading finance event!

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.

[gptAdvertisement]

According to the study, about 76 percent of clients of retail Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term 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.

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.

“Stricter Supervision”

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.