The FCA has removed the regulatory permissions of high-risk investment firm Equitrade Markets Ltd (FRN 441877) due to concerns over failures to satisfy the suitability threshold condition.

Equitrade was an FX broker specialising in the safe of contract for difference (CFD) investments.

CFDs are complex leveraged financial products used to speculate on the movement in prices on a wide range of assets. As a result, they carry a considerable risk of substantial losses.

The regulator removed the firm’s part 4a permission last week after Equitrade failed to refer the matter to a tribunal following a warning notice issued by the regulator to the firm on 28 May and a decision notice issued on 25 June.

In its final notice the FCA said that “it appears to the authority that the firm is failing to satisfy the suitability threshold condition, in that the authority is not satisfied that the firm is a fit and proper person having regard to all the circumstances, including whether the firm managed its business in such a way as to ensure that its affairs were conducted in a sound and prudent manner.” 

Equitrade failed to submit a number of returns and the FCA said it has “not been open and co-operative” with the regulator despite repeated requests to submit returns.

The returns the firm has failed to return to the regulator date between October 2021 and December 2022.

As a result, the FCA concluded that Equitrade “has failed to manage its business in such a way as to ensure that its affairs are conducted in a sound and prudent manner, that it is not a fit and proper person, and that it is therefore failing to satisfy the threshold conditions in relation to the regulated activities for which the firm was granted a part 4a permission”.

The FCA has been cracking down on investment firms offering CFDs in recent years.

In December 2022 the FCA warned firms offering CFDs that it would take action to prevent consumer harm, claiming that around 80% of consumers lose money when investing in them.

Tactics the FCA has seen taken by those offering CFDs have included fake celebrity endorsements, the use of pressure-sales tactics to persuade people to invest increasing amounts of money and inducements being given to customers to upgrade to elective professional status despite clients not meeting the criteria and losing protection under FCA rules.

The FCA has also seen CFD firms giving investment advice without authorisation.

Earlier this week the FCA fined Cypriot CFD firm Forex TB Limited (FXTB) £276,100 for not treating customers fairly and providing investment advice without authorisation.

According to the regulator, the firm pressured customers to put their money at risk through CFD trading, even encouraging them to borrow money from friends or family in some cases.

FXTB also frequently provided its customers with investment advice, despite not being authorised to do so.