FCA Widens Consumer Duty Focus to Complex Exchange-Traded Products

The UK's Financial Conduct Authority (FCA) has warned financial firms to strengthen how they offer complex exchange-traded products (ETPs) to retail investors, citing concerns over weak risk assessments and unclear communication that could breach Consumer Duty requirements.

In a recent review, the regulator said complex ETPs remain a relatively small segment of the market but are growing quickly. The number of retail investors trading these products increased by 23% between July 2024 and July 2025, reflecting broader growth in retail participation.

Leveraged products have been a key driver of this trend. According to the FCA, three-times leveraged ETPs are particularly popular on UK venues such as the London Stock Exchange, where three of the ten most traded ETPs in December 2025 used 3× leverage strategies. The review focused on whether firms distributing these products on an execution-only basis are meeting Consumer Duty standards.

The regulator reiterated that complex ETPs are high-risk investments, often involving leveraged or inverse exposure. Many reset daily, meaning their performance over longer holding periods can diverge significantly from the underlying index. The FCA said this creates a risk that investors who hold the products beyond recommended timeframes may experience outcomes that do not align with their expectations.

While some firms were found to have robust controls in place—such as clearly defined target markets, checks on customer knowledge and ongoing monitoring—the FCA said others need to do more. It urged firms to enhance appropriateness assessments to ensure retail clients genuinely understand key features, including leverage, inverse structures, daily reset mechanisms and suitable holding periods.

The warning follows earlier FCA concerns about consumer protections in other high-risk markets. Last year, the regulator cautioned that retail investors in contracts for difference (CFDs) may lose important safeguards if they are encouraged to be classified as professional clients. Under retail rules, protections such as leverage caps and loss-limiting measures are designed to prevent investors from losing more than their initial stake.

The FCA has also highlighted the growing influence of social media promoters in marketing high-risk products. It said some "finfluencers" direct retail investors to unregulated offshore CFD providers without clearly disclosing the lack of UK regulatory oversight, sometimes promising unrealistic returns. In one case cited by the regulator, more than 90,000 investors lost around £75 million over four years after following such promotions.

The watchdog said firms must not pressure retail clients to give up consumer protections or encourage them to open accounts with offshore entities to bypass UK rules. It added that enforcement action will be taken against firms that use such practices, stressing that Consumer Duty applies across the distribution of complex and high-risk investment products.