Austrian financial regulator initiates 162 investigations in 2016 amid efforts to curtail unauthorized businesses

Maria Nikolova

The FMA is grappling to tackle the activities of “dubious” financial services providers based abroad.

The Austrian financial market remains a lucrative target for unauthorized businesses, according to an announcement by the Austrian Financial Market Authority (FMA) published today. The regulator warns that the number of “dubious” businesses remains high in the face of the decline in the number of investigations launched against such entities in 2016.

The FMA says it initiated 162 investigations in connection to tackling the activities of unauthorised businesses in 2016, this is down from 218 such investigations launched in 2015. The watchdog concluded 204 investigations last year, compared to 254 in 2015. As a result of the investigations, 33 warnings about dubious providers were published, 49 criminal complaints were brought about, and 54 administrative measures were imposed. The latter included 11 penal orders, 3 administrative decisions prohibiting the conducting of business, and 40 procedural instructions.

Whereas the regulator may put an end to the activities of unregulated financial business in Austria, it has problems with enforcement regarding foreign companies. In such a case, the FMA issues a warning and although the regulator says warnings have had a positive effect, the unregulated business activities flourish.

The FMA notes that investors increasingly fall for promises of unrealistically high returns made by unauthorized Forex and CFD companies.

A number of European jurisdictions are planning to introduce extra safeguards for investors by reforming CFD regulations. Germany’s BaFIN has issued a General Administrative Act earlier this year, restricting the offer of contracts for difference (CFDs) to retail clients. CFD brokers have until August 10, 2017, to comply. The German regulator is restricting the marketing, distribution and sale of CFDs with additional payments obligation. These will no longer be available to retail clients in response to concerns of unlimited losses and substantial risks that investors face when the difference to be paid exceeds the capital they have invested because investors have to pay the difference amount from their other assets.

The Central Bank of Ireland is also considering a stricter approach with regards to CFD offering in order to boost investor protection. Among the proposed measures is a ban on the sale and distribution of CFDs.

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