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Regulatory Reminder: CFDs, Spreadbetting & Financial Promotions

28th January 2019

Financial Promotion Reminder to CFD & Spread Bet Firms

It goes without saying that firms within the CFD market should remain vigilant at all times to ensure they adhere to all current regulation and rules in play - and not more so than at present when the regulators have put their business activities within the regulatory spotlight.  

As we have stressed previously, there is intense scrutiny at present upon the CFD and Spread Bet market, with the European Securities and Markets Authority (ESMA) having introduced Product Intervention Measures last summer. Since August last year, the marketing, sale and distribution of CFDs including rolling spot forex and financial spread bets to retail clients has been restricted. Leverage limits as well as other measures have all been put into place affecting how business may be carried out.  

Most recently, the FCA issued a Dear CEO letter as a reminder to all regulated firms on the rules for financial promotions. When the FCA’s financial promotions rules are considered in conjunction with the product intervention restrictions on CFD activities, CFD & Spread bet providers should think carefully how and who to promote their products to, to ensure they remain fully compliant - and particularly when looking to promote the activities of any overseas affiliates.

Firms undertaking these activities must be careful in promoting the services of overseas affiliates that may be outside ESMA’s jurisdiction since the Product Intervention Measures specifically contain a no circumvention clause that states:

“Article 3: Prohibition of participating in circumvention activities: It shall be prohibited to participate, knowingly and intentionally, in activities the object or effect of which is to circumvent the requirements in Article 2 (being the Temporary restriction on CFDs in respect of retail clients)…” ESMA Notice (ESMA35-43-1135)

For any clarification or discussion of the regulatory requirements for your business, please do not hesitate to contact our regulatory and compliance specialists, who would be happy to help. Please contact our Compliance Support Team for a free no obligation discussion of your requirements.

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.