Darwinex secures its second regulatory licence from Spain

In anticipation of Britain’s divorce from the European Union, Darwinex said last year it wants to secure a regulatory license in Spain as a back-up to a potential no-deal Brexit. Darwinex, which offers a hybrid of social-related copy trading solutions, already holds authorization from the UK’s Financial Conduct Authority (FCA).

Commenting on the news, Juan Colón, Darwinex CEO and co-founder said: “It has been a pleasure to collaborate with the CNMV regulator to adapt our business model, compliance processes, operations and finance to the Spanish regulation. This step closes our post-Brexit roadmap. We can now focus on improving our offering and on accelerating our growth. Our investable indices create a symbiosis between traders and investors around an alternative product that stands out for being uncorrelated to traditional markets.”

Last year, the CNMV issued a circular that adopted an aggressive tone and threatened some European brokers that they could end up closing their activity in Spain, as the watchdog was fed up with their unfair practices. In essence, the guidance concerns companies that offer forex, contracts for difference (CFDs) and other speculative products among retail investors in Spain.

At the time, the Spanish regulatory body said it mainly examines CFD brokers based in Cyprus, and that it has its sights set on those who use overly aggressive tactics and practices.

Additionally, the CNMV’s tightening covers activities involving the acquisition of retail clients, including information provided through marketing channels.

This public statement referred to practices such as marketing of investment services and client acquisition activities through non-authorised third parties. The watchdog clarifies that paying to unregulated affiliates and introducing brokers is not permitted and that marketing activities can be carried on only by authorised representatives or their tied agents.

In addition, the CNMV observed that in many cases, this acquisition activity is carried out in an aggressive manner by persons lacking appropriate knowledge and skills.

Moreover, the Spanish authority warned these brokers of using their European license as a proxy to promote CFDs products offered by their offshore brands, which are mostly located in other countries and not authorised to operate in the EU.

The CNMV’s circular contains rules on the procedures and controls institutions should adhere to. It also advises on the content and format of advertising messages, taking into account the criteria that the regulator applied in its supervisory actions.

To conclude, the watchdog made clear it will continue to support the adoption of ESMA’s curbs on risky products at European level to enhance investor protection.