Cantor Index, the spread betting firm, was fined £70,000 yesterday for a misleading advertisement promoting its high-risk financial betting service.
Cantor had been offering new customers a free Xda, a combined hand-held computer and mobile phone, to entice them to use its spread betting service.
However, the Financial Services Authority said the campaign was misleading and that Cantor's senior management, led by Lewis Findlay, the managing director, had failed to ensure adequate systems and controls were in place to ensure its financial promotions were systematically monitored.
The FSA said: "The promotional material, which included flyers handed out at London stations, posters and advertisements on television and in the popular press, did not contain adequate warnings about the risks of spread betting and consequently put a large number of potential customers at risk."
A key risk of spread betting is that if a spread bet position moves against the customer they can lose far more than their initial deposit. Cantor's free Xda offer was promoted in a way that attracted the attention of relatively less experienced investors, the FSA said. The company did not, however, consider the greater potential risk posed or take appropriate additional steps to ensure that those investors understood the risks associated with spread betting, according to the regulator.
In fixing the penalty, the FSA said it recognised that no customer had suffered any loss as a result of the company's failings and that the potential impact of the misleading offer had been mitigated by its remedial action.
A spokesman for Cantor said: "[We] understand and accept the concerns that the FSA had regarding the promotional activity surrounding the launch of the wireless Xda. Cantor Index has put in place rigorous and effective procedures that will prevent a repeat." Anna Bradley, the director of the FSA's retail themes division, said: "The provision of clear, fair and not misleading financial promotions is a key priority for the FSA because of the potential impact that misleading promotions can have on consumers."Reuse content