CFD Brokerages Working to Overcome Regulation
The European Securities & Markets Authority have forced brokerages and financial firms to abide by the product intervention measures implemented a year ago. There are still some brokers that aren’t abiding by the regulation guidelines as noted by a published statement from the ESMA. This public statement on their website noted concerns regarding the illegal practices on marketing, selling and distributing CFDs for retail clients.
The ESMA for the last twelve months has observed blatant attempts of non-compliance with the legal regulations of the new product intervention measures. These observation tests pertained to retail clients becoming professional clients and market distributors working with third-country CFD Brokerages. There are brokerages that are finding loopholes in the new regulation which allow for retail clients to get professional status. This is concerning as pressure on these retail investors will be immense, causing for improper decisions to be made with trades.
The official statement reads as: “In this respect, any form of promotional language in relation to the status of professional client shall be incentivising a retail client to request a professional client status. This includes providing a comparison between leverage limits available to different types of clients and the provision of any form of rewards for becoming a professional client.”
Brokerages Circumventing Players to Third-Nation Subsidiaries
The European Securities & Markets Authority in the official statement also noted that it’s identified multiple brokerages in the European Union that have been circumventing their clients to third-nation subsidiaries. As such, their retail clients can avoid to product intervention measures implemented by the ESMA. However, this causes for industry-wide values in the European Union to fall. It also goes against direct legislation that states brokerages can’t solicit the business of subsidiary brokerages. It’s suspected that these illegally-operating firms will be named in the coming weeks.
The end of the official statement read: “Furthermore, information in relation to the benefits of trading CFDs with such an intra-group third-country entity could be seen as a circumvention of ESMA’s product intervention measures by the EU authorised firm.”
Haydn Franklin
