Distributing or selling contracts for differences (CFDs) to retail clients

According to ESMA statement it has serious concerns about firms’ marketing, distribution or sale of CFDs to retail clients and considers it necessary to remind CFD providers about some of the requirements connected with the offering of CFDs. 

ESMA has identified undesirable practices related to:

  • Professional clients on request; and
  • Marketing, distribution or sale by third-country CFD-Providers.

Ensuring investors are protected necessitates that all CFD providers respect all applicable requirements and do not circumvent them using professional client status or third country entities.”

Professional clients on request

ESMA is aware that some CFD providers are advertising to retail clients the possibility to become professional client on request. Investment firms should strictly refrain from implementing any form of practice that incentivises, induces or pressures an investor to request to be treated as a professional client. In this respect, any form of promotional language in relation to the status of professional client shall be seen as 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.

In order to mask wrongdoing, in some cases, CFD providers will change the client categorization status according to their needs (first from retail to professional, and then from professional to retail once you lost your invested capital), with no compliance justifications.

ESMA is also aware that some third-country firms are marketing CFDs that do not comply with ESMA’s measures to retail clients.

ESMA notes that firms should not incentivise retail clients to start trading with an intra-group firm established in a non-EU jurisdiction.

You can control your faith, don’t be tempted to change your categorization status from retail to professional, and/or open an account with non-EU firms.

EU rules are here to protect you, and reduce your risk. Please rest assured that the regulator does not like it when you lose your invested capital. Protecting you is part of the regulator missions.

 

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