A Central Bank inspection has found several compliance concerns in financial spread betting and contracts for difference firms.
The Central Bank said it inspected four companies with about 80 files being reviewed. The inspection found that none of the firms were fully compliant with market regulations while a number of firms also had a particularly low level of compliance.
The Central Bank has not named the firms involved.
The inspection found that firms gathered insufficient information about their clients' knowledge and experience with financial transactions, while clients' application forms were also found to be inadequate.
Under regulations, firms are required to take into account whether a product or service is appropriate for the client and if not suitable, a client must be warned of this. The Central Bank inspection found that in some cases the 'assessments of appropriateness' were inadequate or were not carried out at all.
The marketing material used by firms was also found to be misleading in some cases and was not sufficiently balanced to outline both the benefits and the risks of CFD and financial spread betting.
The Central Bank said that risk warnings and disclosures on the companies' websites and documentation was also found not always to be adequate to convey the risks associated with the financial product.
The issues identified in the inspection are being followed up with the firms concerned and the Central Bank said it is considering enforcement action in some cases.
'Consumers need to be made fully aware of the complexity and very high risks of CFD and financial spread betting before making investment decisions.' commented the Central Bank's head of consumer protection Sharon Donnery.
'Some of these investment firms are failing to fully inform and provide adequate warnings to consumers of the risks that CFD and financial spread betting carries before they begin trading,' she added.
Foreign debt held by Irish banks dropping
Separate Central Bank figures show that the amount of foreign debt held by Irish banks continued to fall in the first three months of 2011, as the domestic banks significantly reduced their international activities.
The bank said the exposure of the domestic banks - those covered by the State guarantee - to the rest of the world was €187 billion at the end of March. This was down 20% from a year earlier and 36% from the peak in September 2008.
The UK accounts for 62% or €115.5 billion of the total, with the US next with €19.5 billion or 10%. Poland, France, Spain and Germany also have a sizeable share of foreign claims, though these are declining.
Most of the Irish banks' UK claims are on the non-banking private sector.
