Happy Xmas – Segregation of Funds

Merry Xmas to London’s spread betting firms, a rumour has been making the rounds in the City that the Financial Services Authority could have a present waiting for some of you.

The word in London is that in a similar way to Father Christmas, the financial regulator is in the final stages of publishing a list of who has been naughty or good over the past year.

Fortunately for the people who are involved in the spread betting industry, the measure won’t be about who has made their bed, rather what they have done with their spare change.

Earlier this year, the UK Financial Services Authority had responded to the financial crisis by introducing new regulations as to when and how spread betting providers should use segregated accounts to look after client monies that aren’t staked on the markets.

The FSA appears to be referring to the ‘Collateral Title Transfer’ provision. Under this provision firms have been regarding money deposited by retail clients as relating to ‘present, future, actual, contingent or prospective obligation’ and thus some providers have got clients to agree that the title and ownership of that money is transferred to the firm and hence not held as client money.

I understand that the larger spread betting providers including Capital Spreads, IG Index and Spreadex do not use this provision and properly segregate and protect monies deposited by and owing to clients – and are obviously keen to have the FSA name and shame the naughty ones.

Will the Financial Service Authority resort to this? I hear that this is so; shortly after Christmas.

Tags: capital spreads, igindex, spread betting, spreadex

This entry was posted on Monday, December 21st, 2009 at 3:58 pm and is filed under Industry Happenings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.