By Jackie Pearson
Delia Rickard, the Australian Securities and Investments Commission's senior executive leader and retail investors, yesterday told True Penny Media that Contracts for Difference (CFDs) were not suitable for most small investors.
"ASIC would say CFDs are not suitable investments for most retail investors, they are highly leveraged and your potential losses are far greater than with other types of investments," says Ms Rickard.
When asked why there was currently so much print, television and online advertising of CFDs that was targeting small investors, Ms Rickard said ASIC was planning "more work" in this area.
In other countries, including the United States, the purveyors of financial products are restricted in the types of products they can sell to retail or unsophisticated investors. For example, US retail investors were not allowed to put their money into the Collatoralised Debt Obligations (CDOs) that were packages of sub-prime mortgages sold to investors around the world prior to the GFC.
In Australia protection for small investors is based on disclosure. That means that if a financial planner or product provider gives you a product disclosure statement and you sign it, you are essentially entering a buyer beware situation.
This Blog will be paying close attention to high risk financial products like CFDs and campaigning for strong protections to be put in place. We don't believe retail investors should have to wait for the next meltdown or market failure before their savings are given the protection they deserve
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