MFSA Announces Permanent National Restrictions on CFDs

The Malta Financial Services Authority (MFSA) is the latest European regulator to implement product intervention measures against contracts-for-differences (CFDs) on a national scale.

The authority announced this Tuesday that it has updated its Conduct of Business Rulebook to essentially restrict the Marketing Marketing Marketing is defined as the business process of identifying, anticipating and satisfying customers' needs and wants.This is a crucial element of any operation or brokerage in the financial services space. Well-funded marketing campaigns are instrumental to the survival and longevity of these companies in an increasingly competitive industry.Within the forex space, marketers perform a wide range of functions to help procure, secure, or retain clients.In particular, newer forex brokers also have t Marketing is defined as the business process of identifying, anticipating and satisfying customers' needs and wants.This is a crucial element of any operation or brokerage in the financial services space. Well-funded marketing campaigns are instrumental to the survival and longevity of these companies in an increasingly competitive industry.Within the forex space, marketers perform a wide range of functions to help procure, secure, or retain clients.In particular, newer forex brokers also have t Read this Term, distribution or sale of CFDs to retail investors.

The measures implemented by the Maltese watchdog are the same as the temporary measures previously implemented by the European Securities and Markets Authority (ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term).

As Finance Magnates reported, ESMA stopped renewing its temporary measures on August 1 this year. Since then, almost all European regulators have more or less copied the temporary measures which were in effect for one year.

The permanent restrictions introduced by the MFSA include requirements that ensure investors do not lose more money than what they put in. To achieve this, the regulator now mandates that investors must be provided with understandable risk warnings, and restrictions on certain incentives to trade CFDs have also been put in place.

According to the statement published today: “During the last years, the European market has witnessed a rapid increase in the marketing, distribution or sale of CFDs to retail clients across the EU. CFDs are inherently risky and complex products."

“European regulators have expressed widespread concerns on the increasing number of retail clients trading in these products and having them losing their money. These concerns are also supported by the numerous complaints received from retail clients across the EU who have suffered significant losses when trading CFDs.”

ESMA approves MFSA regulations

On July 30, ESMA responded to the Maltese regulator’s proposed measures, stating that they are the same as ESMA’s on a national level. Overall the regulator concluded that “the national measures are justified and proportionate.”

Commenting on the measures, the MFSA’s Head of Conduct Supervision Dr Michelle Mizzi Buontempo, said: “these rules, in line with the MFSA’s Vision, seek to strike a balance between the market’s need to provide fair competition and client choice, while at the same time protecting consumers of financial services, and safeguarding the integrity and stability of the financial system.”