CFDs and how you can lose more than you put in

A contract for difference, or CFD, is an agreement to exchange the difference in value of an asset between the time you open the contract and the time you close it. You never own the underlying asset. Because the position is leveraged, a small move in the price produces a much larger gain or loss on the money you put down, and that is how a CFD loss can end up bigger than your deposit.

The Financial Conduct Authority restricted the sale of CFDs to retail customers in 2019, limiting borrowing and requiring loss-rate warnings. It did not ban them. In 2025 the FCA warned that CFD investors risk losing UK protections through redirection offshore, and firms have been closing or pulling out of the market since the crackdown.

The practical consequence for a consumer is that the money you put in is not a cap on what you can lose, and the protections you might assume apply to a UK investment account can disappear if your account is moved to a firm outside the UK's authorisation.

What a CFD is and how losses can exceed your deposit

A CFD is a derivative: you and the firm agree to settle the difference between the price of an asset when the contract opens and when it closes. You do not buy the asset, so you have no ownership, no voting rights and no dividend entitlement in the ordinary sense. What you have is exposure to a price, magnified by borrowing.

That magnification is the whole mechanism. If you put down a fraction of the value of the position and the market moves against you, the loss is calculated on the full position, not on your deposit. A move large enough to wipe out your deposit leaves a shortfall that you owe the firm. The FCA's own rules on costs recognise how many charges sit on top of the bet itself: proportional fees, the bid-mid spread to sell the product, explicit costs, charges or penalties for early exit, CFD-related costs, and exchange, clearing and settlement fees for derivative-based investments¹.

The wider investing literature is blunt about the ceiling on losses. Independent guidance on investing states that in extreme circumstances you could even lose all your money⁴. With a leveraged derivative the exposure runs past that point, because the position is larger than the money you committed.

It helps to separate two different things a reader might mean by "losing more than you put in". The first is losing the deposit and then some, which is a feature of leverage. The second is losing money you thought was protected, which is a question about regulation and compensation rather than about the trade. The rest of this page deals with the second.

FCA limits on selling CFDs to retail customers

The FCA restricted the sale of CFDs to retail customers in 2019. The measures limited borrowing and required loss-rate warnings, and they changed what a firm can offer a retail client rather than removing the product from the market. Firms responded by closing or withdrawing: twenty-four CFD firms were closing in the wake of the crackdown on the misuse of UK authorisation, and one firm stopped selling CFDs in May 2025 after being fined £338,000 by the FCA in March.

The rules sit inside a broader duty owed to retail customers. The Consumer Duty applies across all of a firm's regulated activities, from high-level strategic planning to individual customer interactions⁵. That matters to a CFD customer because it is the standard against which a firm's conduct, including how a product was promoted and sold, can be judged.

The limits are not a guarantee. A restricted product is still a leveraged product, and the loss-rate warnings exist precisely because most retail accounts lose money. A reader who sees a warning that a high proportion of customers lose money should read it as a description of the product, not as small print.

Being moved offshore can cost you UK protections

The FCA warned in 2025 that investors in CFDs risk losing UK protections through redirection offshore. The mechanism is straightforward: if the firm you are dealing with is not authorised in the UK, the UK's compensation and complaint machinery may not reach it.

The Financial Services Compensation Scheme covers a range of financial products if a UK-authorised financial firm fails, including deposits, insurance, investments, pensions, mortgage advice and certain other regulated services⁶. Investment protection depends on the provider being authorised by the FCA or the Prudential Regulation Authority⁷. Where a firm is not authorised, that route closes.

The same pattern shows up in other markets. Guidance on cryptoassets notes that you could lose all your money and may not be protected by the Financial Ombudsman Service or Financial Services Compensation Scheme if something goes wrong⁸. Unregulated investments more generally sit outside the rules of the Financial Conduct Authority⁴. And a key features document for an offshore bond states plainly that FCA rules for the protection of retail clients under the Financial Services and Markets Act 2000 will not apply to policyholders⁹.

There is a second, quieter cost. Once a dispute is with an overseas firm, the practical route to redress narrows to whatever that country's regime offers, and the FCA's ability to act on your behalf is limited. The FCA has also noted that where a foreign exchange transaction is carried out independently of any payment services, those funds do not have to be safeguarded¹⁰, which is a reminder that the protections around money in an account depend on what the firm is doing with it.

Unauthorised CFD promotions and where to get help

Unauthorised promotions are the other way CFD losses happen. A firm or an individual promotes a CFD product without permission, the customer signs up, and the regulatory safety net that would normally apply is not there. The FCA has brought allegations of unauthorised financial promotions of foreign exchange CFDs, with a trial date set for 12 June 2028.

Checking is not difficult, and it is the single most useful thing a reader can do before opening an account. The FCA register lets you check whether a provider or adviser is authorised by the PRA or FCA¹¹. Search using the firm's name or its firm reference number, and if the status shows as authorised, FSCS may be able to compensate you if the firm fails: the firm was authorised, it carried out a regulated activity for you, you lost money, and it owes you a legal liability. The FSCS protection checker draws its results from the FCA's Financial Services Register, which you can search yourself¹².

Two checks matter, not one. First, is the firm authorised. Second, is the particular activity it is carrying out for you a regulated one, because authorisation covers specific permissions rather than everything a firm does⁷. A firm can be authorised for one activity and not another.

If something has already gone wrong, the order of steps is:

1. Complain to the firm first and give it the chance to put things right¹³.
2. If you are unhappy with its final response, take the complaint to the Financial Ombudsman Service, which can consider complaints about advice from a firm regulated by the FCA¹⁴.
3. If the firm has failed, the Financial Services Compensation Scheme handles claims, but only where the firm was authorised, it carried out a regulated activity for you, you lost money, and it owes you a legal liability³.

Where a financial adviser recommended an unregulated investment, there may still be a route to a claim¹⁶. That is a narrow exception and it depends on the adviser having been regulated at the time and having since gone out of business¹⁷.

For free, impartial help, MoneyHelper and the debt advice charities can talk through options, and the Financial Ombudsman Service can tell you whether it can take your complaint. Where a firm has failed or stopped serving customers, the FSCS claims process is the route, and it is free to use.