France’s financial regulatory body, the Autorite des Marches Financiers (AMF) said on Tuesday it has set specific requirements for ban on the online advertising of risky financial products, including forex, binary options and contracts for difference (CFDs). The new rules are included in the Sapin II law and refer to advertising to retail investors. The above-listed instruments are speculative and risky and their direct and indirect electronic advertising affects trader and their decisions.
The financial regulator intends to combat the practice of online advertising of forex, binary options and CFDs to retail investors as they are risky with the following activities:
- Monitoring and publication of blacklists of unauthorised forex and binary options sites;
- Hotline for investors through its Epargne Info Services platform (01 53 45 62 00);
- Lawsuits to block access to illegal sites;
- Investigations into authorised entities and unregulated sites;
- Actions to have the Cypriot regulator develop controls and sanctions against authorised companies in that state;
- Activation of Article 62 of MiFID (3) to ban the operation in France of sites that are authorised in the European Union but fail to comply with applicable laws.
The new legal framework has resulted in the amendment of the country’s Monetary and Financial Code and the Consumer Code. The AMF is sharing responsibility for it with the General Directorate for Competition Policy, Consumer Affairs and Fraud Control (DGCCRF). The AMF will conduct active monitoring to identify banned advertisements while the DGCCRF and the AMF may, in accordance with their respective powers, sanction those involved.
The new rules are a considerate step forward for consumer protection, the AMF said in the statement. According to data it provided, the toll of losses is incontrovertible and clients of leading services providers authorized by serious regulators reported €175 million in losses compared with €13 million in gains over four years and 90% of them lost money.
For years, traders have been lured by promises of easy, no-risk gains. Brokers often use high-traffic websites to promote their activities, many of which employ questionable if not illegal practices.
“The impacts are significant: beyond the losses caused by unauthorised services providers, a study by the AMF showed that highly speculative trading is inherently dangerous for retail investors,” the regulator noted.
Earlier this year, the AMF announced its decision to ban advertising on forex, binary options and CFDs. The French National Assembly has passed the proposed new rules in Q3.
France is not the only country to take steps in this direction. In the last few months, financial trading markets have been the target of the authorities of a number of countries, mainly in Europe. The Cyprus Securities and Exchange Commission (CySEC) and the Financial Conduct Authority (FCA), the two leading forex regulatory destinations in Europe, announced they are to alter the standards for key forex trading conditions. Both authorities are setting a new leverage cap of 50:1 (25:1 for inexperienced traders with less than 12 months of trading under the UK framework). They are both banning bonuses or other benefits to promote risky trading instruments.
While the new requirements set by the CySEC sounds rather recommendation, the UK watchdog uses a more compulsory tone. The changes were triggered by the recommendations and guidelines of the European Securities and Markets Authority (ESMA) from mid-October in regards to forex and binary options regulation.
Earlier this year, several financial watchdogs also launched an attack against binary options. Belgium banned from 18 August the distribution via online channels of over-the-counter (OTC) binary options, spot forex, and CFDs with leverage. Meanwhile, the Netherlands and Germany have also announced they considers ban on the advertising of such instruments, calling them “toxic investment products for consumers”.
Israel, which is not an EU member state, also imposed a ban on trading in binary option instruments in the country. Recently, the Israeli regulator also said it is to ban the advertising of binaries to retail clients abroad, which would put an end to major brokers will not be able to operate locally-based call centers.