Spread betting is governed by the Financial Services Act 1986, and spread betting firms are authorised by the Financial Services Authority (FSA).

The FSA's role, in a nutshell is:

• to authorise investment firms
• to monitor authorised firms
• to decide the rules which firms have to comply with
• to enforce its rules
• to keep an eye on the financial health of firms

FSA regulation means that companies have to adhere to strict rules on company conduct, handling of client money, liquidity levels and financial resources.

From your point of view, the important points are:

• Only bet with firms that are FSA regulated. All the firms that are regulated will plaster the fact all over their marketing literature and websites, so you should never be in any doubt.
• FSA regulation forbids spread betting companies from providing advice on bets. So there's no point asking your dealer to recommend a good bet.
• If you have a complaint - for instance, you think your dealer executed your bet at the wrong price - the first thing is to raise it with the firm. They tape all their phone calls, and that can be a quick way to sort out a misunderstanding. If you're still not happy, there is a complaints procedure to the FSA.
• The Financial Services Compensation Scheme provides you with up to £48,000 compensation, should you lose money through your indexation company going bust or behaving fraudulently.