All spread betting companies are governed by the Financial Services Act of 1986, and ultimately regulated by the Financial Services Authority (FSA). The FSA's main responsibility is to maintain confidence in the financial system and to secure an appropriate degree of protection for consumers.
- The FSA is also in charge of authorising and monitoring the financial health all spread betting firms as well as vigorously enforcing its rules
- Clients are therefore assured of the financial and ethical stability of their spread betting broker
The regulations of the FSA also prohibit spread betting firms from offering or pushing financial advice. If a client therefore asks for a 'tip' or advice on where the market is going, he or she will not receive any guidance. However if a client wants or needs advice on the best spread bet (such as a Daily or Weekly bet) for their trading view, then this is allowed.
- For example a spread betting client may be bullish on Vodafone but is unsure of the merits of using a daily over a weekly spread bet
- The spread bet broker can certainly advise on questions such as these, as well as other help on topics such as risk limitation etc
In summary, spread betting firms are as well regulated as any stockbroker or financial firm operating in the UK.
Investor Protection
The FSA requires all spread betting firms to hold their client funds in a bank account which is segregated from the spread betting firm's main business account.
- All Private Customers are also covered by the FSA Compensation Scheme up to £48,000
- This means that should a client have £10,000 deposited with a spread better, this money is guaranteed should the firm fail
However one should never really rely on a website such as this for confirmation of such an important and critical topic. It is prudent advice to get the exact policies in writing regarding financial problems, meltdowns and investor protection from the spread betting companies themselves.