David,
Nice article, hopefully it got through to some members of the public who otherwise would have been roped into something unsuitable for them under false pretences.
The spreadbetters generally use proprietary platforms and have the ability to do whatever they want with spreads, prices, execution etc it's all within the Ts&Cs. However, it really doesn't make any business sense for them to spend all day watching their clients trade. As noted above the client is going to lose anyway, why ruin their reputation by fixing it? I am talking of the big players like IG. Even if you beleive something has gone wrong like mis-pricing etc they will run an investigation and if you can prove your stop-loss wasn't reached or profit target got tagged then they will amend the trade for you. The big spreadbetters all get their prices from the big liquidity providers just like other brokers. Normal brokers have the ability to fix all of the above just like the spreadbetters do (a la fxcm positive slippage). At the end of the day it's an over-the-counter market and you are trading against the broker. It's up to the broker if they want to hedge or not. The mandatory hedging by regulation is virtually nil.
Taking all that into account I don't think IG are dodgy, let's be honest they have more than 3/4 of the market so it's them that we are really talking about! They wouldn't fix it for the same reason online gambling firms don't fix their software and odds. Fines and bad reputation have a disastrous effect in an industry so heavily built on trust.
note, this is from a forex, futures and commodities perspective. Looking at spreadetting on shares is crazy imo, why would you trade short term in shares and pay the spread plus commission? The edge required is huge just to break even.