CFA welcomes ASIC action on Contracts for Difference (CFD)

Contracts for difference – CFDs – are risky financial products that should not be marketed to ordinary retail investors in CFA’s opinion. CFD’s are not ordinary shares and significantly magnify the risks of investing.

CFA has welcomed ASIC’s release of new disclosure benchmarks for CFDs that aim to improve disclosure and investor awareness about risks of these products.

In Australia, most CFDs are issued as over-the-counter products, making them increasingly accessible and popular with retail investors. But CFDs are a high-risk financial product and their complexity means they are unlikely to meet the investment needs of many retail investors.

ASIC Chairman Greg Medcraft said action was needed to ensure people considering CFDs are aware of the downside as well as the upside.

‘CFDs are extremely risky financial products. Most investors don’t understand that complexity and they don’t get independent financial advice. That means we need CFD issuers to do a much better job of spelling out to investors the risks as well as the rewards of these complex products,’ Mr Medcraft says.

‘ASIC’s number one priority is ensuring investors and financial consumers are confident and informed. We want issuers to work harder to ensure people investing in CFDs better understand what they are getting into – before they start trading.’

See the ASIC media release here

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