Chairman of France’s AMF urges further action against toxic financial products

Robert Ophèle, Chairman of France’s financial markets authority (AMF), has called for making full use of the new powers given to national regulators thanks to the recently introduced MiFID II rules. In a speech, delivered on January 16, 2018, Mr Ophèle noted the importance of the restrictions on high-risk financial products such as binary options and CFDs without intrinsic protection that were implemented as a part of the Sapin 2 law. He also stressed that these restrictions have led to a drop in digital ads of such toxic products.

Mr Ophèle added, however, that further steps should be taken with regard to such products. He said that the powers given by the MiFID II rules to national regulators should be fully exploited and that more restrictions should be imposed on the offering of certain financial products. He stressed that these measures should include a ban on commercialization and not only a ban on advertising.

With regard to new challenges, Mr Ophèle noted that the advertising of cryptocurrencies has inundated the media and that it is difficult to detect the actual location of an ad source. He mentioned this as a developing problem for the French regulator with regard to digital advertising.

Mr Ophèle’s comments echo the concerns expressed earlier today by the European Securities and Markets Authority (ESMA). The European regulator has published a consultation which aims to present new rules for retail investor protection. The new rules for CFDs include proposals for capping maximum leverage to 5x-30x, whereas, in relation to binary options, the regulator is considering a prohibition on the marketing, distribution or sale of binary options to retail clients. ESMA is currently minded to adopt this measure as the significant investor protection concerns relating to this product are due to inherent features of the product that are unlikely to be sufficiently addressed through certain restrictions on the product (such as minimum duration contract periods).

ESMA is also considering how CFDs on cryptocurrencies fit within the MiFID regulatory framework as financial instruments. The regulator is currently discussing whether CFDs on cryptocurrencies, whose underlying assets have displayed very high price variation, should be addressed in the measures and whether a 5:1 initial leverage would provide investors with sufficient protection. Alternatively, a lower leverage limit (2:1 or 1:1) or stricter measures (such as a prohibition on the marketing, distribution or sale of CFDs in cryptocurrencies to retail clients) could be considered.