FCA bars Cypriot investment firms that used 'unauthorised celebrity endorsements'
The Financial Conduct Authority (FCA) has banned four Cypriot investment firms from continuing to offer high risk contracts for difference (CFDs) to UK investors, the regulator announced this morning.
The British financial regulators said that these firms used unauthorised celebrity endorsements on social media as part of their marketing. The orders require them to stop selling CFDs to UK customers, to close existing positions with UK customers, to return UK customers' money and to notify UK customers of the FCA's action.
The firms are entitled to seek a review of the FCA's action.
Hoch Capital Ltd (trading as iTrader and tradeATF), Magnum FX (Cyprus) Ltd (trading as ET Finance), Rodeler Ltd (trading as 24option) and F1Markets Ltd (trading as Investous, StrattonMarkets and Europrime) used social media and webpages carrying fake endorsements from celebrities to entice consumers into the scams involving CFDs.
The FCA estimates that UK investors have lost hundreds of thousands of pounds in these investments.
None of the firms and their operators have any actual presence in the UK and the firms have addresses in Cyprus.
The FCA said it took the action because consumers were not provided with sufficient information as to the nature of the investments, some were pressured into making increasingly large investments in CFDs, which referenced bitcoin, foreign exchange, shares and indices, and some were even encouraged to take out credit to make the payments.
It also appears that the firms had failed to pay money owed to investors, charged customers undisclosed fees and failed to tell them about the risks of trading CFDs.
CFDs are complex financial investments which allow traders to speculate on the movement in prices of underlying assets and can cause heavy losses to unwary or inexperienced investors.
A number of customers are known to have lost more than £100,000 to the schemes.
The Cypriot-regulated firms - which were permitted to operate in the UK through a method known as passporting - must now cease all regulated activities with UK consumers.
It is the first time the FCA has used its power to remove passporting rights from a firm.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "The FCA has removed passporting rights for these firms which effectively stops them from continuing to provide these types of products in the UK. We welcome the further action taken by the CySEC. The FCA's investigations into the sector are continuing."
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