BaFin publishes guidelines on CFD marketing and distribution

Maria Nikolova

The requirement for risk warnings also extends to smartphone apps, videos and social media messages, the German regulator notes.

Today, Germany’s Federal Financial Supervisory Authority (BaFin) published guidelines on the General Administrative Act pursuant to Article 42 of Regulation (EU) No 600/2014 (MiFIR) regarding contracts for differences (CFDs).

The guidelines are intended to provide information for providers of CFDs to adapt their practices for the marketing, distribution and sale of CFDs to the provisions of the Act and to avoid violations of these provisions.

In these guidelines, BaFin refers to topics that it identified as problematic when reviewing CFD offers. Among other things, the guidelines make clear once again that the provisions of the Act are to be legally implemented in the business and contractual conditions of the CFD providers, and that the requirement for risk warnings also extends to smartphone apps, videos and social media messages. These risk warnings for the retail investor must be prominently displayed.

The guidelines also explain that the mandatory specification of a risk warning also applies to advertising and marketing partners of CFD providers such as so-called affiliate partners and introducing brokers. CFD providers must ensure that these partners also comply with the provisions of the Act. Violations by these partners are attributed to the CFD provider.

Due to significant concerns about investor protection, BaFin had restricted the marketing, distribution and sale of CFDs with its Act of July 23, 2019. BaFin continuously monitors compliance with the product intervention measure. Infringements represent an administrative offense and can be punished with a fine.

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