CySEC has issued multiple official notes sent to the addresses of Cyprus Investment Firms (CIF’s) that point to the need for ensuring that the new regulations are followed and enforced.
The Cyprus Security and Exchange Commission requires all CIF’s who are operating and offering their services in Germany and Spain to comply with the newest regulations regarding Forex and CFDs. According to the official notes, all regulated brokers that offer speculative products such as binary options, forex and CFD’s to Spanish retail investors, must follow the regulations set by the Comision Nacional del Mercado de Valores (CNMV).
This, aforementioned financial regulatory body of Spain, requires brokers to issue an explicit warning to the investors referring to the complexity and large risks associated with speculative financial products. This is specifically aimed at brokers which offer a leverage ratio larger than 10:1.
Firms are also instructed to make sure the clients know of the estimated cost they will be facing in situations where they opt to close their positions right after they enter the transaction. Investors also need to be warned about the possible losses which can be greater than their initial investment when it comes to trading with CFD’s and forex.
On top of that, the CNMV will also have to acquire a written or spoken record from the investor which notes that he/she is conscious of the complexity and risks associated with the product.
Those firms who are based in Germany will have to do similar to make sure BaFIN’s new regulations are being enforced.
BaFIN, which is a German financial regulator, confirmed earlier this month that they are trying to protect the interests of small investors. Their new regulative measures are designed to limit the operational scope of forex and CFD’s for those brokers who are not willing to introduce a negative balance protection. This means that the marketing, distribution, and sales of those products will be severely limited in those cases.
The brokers in question have three months from the publication of the regulations, to redesign their business practices to comply with the new German measures.