Derivatives (e.g., options, futures, swaps) carry high complexity and risk, requiring financial advisers to disclose additional obligations under regulatory guidelines.
Why Required?
High Leverage Risk: Clients may lose more than their initial investment.
Margin Calls: Clients may be required to add additional funds if the position moves against them.
Complex Nature: Not all retail investors understand derivative pricing and risk exposure.
Regulation: The FCA Conduct of Business Sourcebook (COBS 14) requires full disclosure for derivative products.
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