France’s AMF checks how investment firms assess client knowledge

Maria Nikolova

The firms checked by the regulator have overall improved their practices of testing the knowledge of their clients about financial products.

One of the main topics of the MiFID II rules has been investor protection and the regulatory changes have involved changes to onboarding procedures at investment firms, as well as more detailed tests of the level of clients’ expertise with regard to a certain financial product. This is a rather pressing issue, if we take into account that the latest ESMA restrictions on CFD offering, for instance, simply do not apply to professional investors, and hence, the risk of clients being easily transferred to the “professional” category has been present.

Earlier today, France’s Financial Markets Authority (AMF) has published a summary of the findings stemming from five checks related to the knowledge and experience of clients of investment firms.

The checks, carried out early in 2018, have been done under a new AMF program called SPOT. The checks have uncovered both good and bad practices, but the regulator underlines that, overall, the practices related to checking clients’ knowledge of financial products have improved.

More precisely, the regulator has identified a number of good procedures. For instance, the firms are now asking their (potential) clients various questions, depending on the type of financial product offered to the client. Also, clients are offered a document setting forth in a clear manner the peculiarities and the risks associated with complex financial or risky products. Another good practice is to periodically revise the questionnaire.

There are bad practices that the AMF has uncovered too. For instance, some firms have asked questions that had no possible answer for “no knowledge”. Instead the options were low / medium / good knowledge. In addition, some firms still allow clients choose their profile by self-assessment.

Earlier this month, the French regulator warned of some issues related to the implementation of the new ESMA rules. AMF’s Chairman Robert Ophèle said chaos may emerge if ESMA stops renewing its measures restricting CFD offering to retail investors and prohibiting binary options. According to him, once ESMA does not renew the rules for CFDs and binary options, there will be a multitude of national regimes regarding the offering of these products. This will result in chaotic surveillance of products that are marketed online.

  • Read this next

    Podcasts, Women of the Industry

    FF Podcast delves into the rise of prop trading as Brokeree releases Prop Pulse

    In the latest FinanceFeeds Podcast, Tatiana Pilipenko discusses Prop Pulse, Brokeree Solutions’ platform for prop firms and retail brokers aiming to delve into prop trading. Offering a flat fee structure, Prop Pulse emerges as a scalable solution in an era where successful traders increasingly prefer prop firms over traditional retail brokers.

    Inside View

    Scalping or day trading?

    Among the many popular trading styles with both beginners and experienced traders are scalping, which allows you to extract small portions of profit from each price movement, and day trading, which aims to trade over a single day. In this article, you will learn what scalping and day trading are and their differences and peculiarities. Ultimately, you will learn what to look for to understand which trading style is right for you.

    Crypto Insider

    Unveiling Plasma Next: INTMAX’s Solution to Scale Ethereum with Stateless Layer

     INTMAX has launched Plasma Next on the mainnet α, a groundbreaking Layer 2 zkRollup, revealed by co-founder Leona Hioki at ETH Denver. This innovation offers scalability with constant costs per block, merging Plasma’s scalability goals with zkRollups’ security.

    Fintech

    Nuam selects Vermiculus for clearing system in Chile, Colombia, and Peru

    “We are proud to deliver a system that plays an integral role in the core of this historical merger, empowering one of Latin America’s most crucial markets with VeriClear’s state-of-the-art technology, together with our deep market expertise.”

    Retail FX

    Moomoo launches super app in Malaysia

    “As an investment platform connecting 21 million retail investors globally, we envision collaborating with exchanges, regulatory bodies, and partners in the visible future to become the gateway, connecting Malaysia’s investment products to global capital and investors.”

    Executive Moves

    FXPA elects Joe Hoffman as new Chair in its 10th anniversary

    “The opportunity to serve as Chair of the FXPA is truly an honor, and I am committed to upholding the exceptional work of a FXPA. Given the recent market fluctuations due to global tensions, inflationary pressures, shifts in monetary policy, as well as the outcome of the US election and the risk of recession, brings the potential for more FX volatility in 2024. I am dedicated to expanding the FXPA’s membership and I’m excited about collaborating with all members to echo the unified voice of the FX market.”

    Market News

    Eurozone Fights Stagnation Whilst Stock Indices Rally

    European stock markets are defying economic gloom as they continue to soar to all-time highs, showcasing resilience amidst broader economic challenges.

    Web3

    Lisk Partners with Indonesia’s Communications Ministry to Boost Web3 Startup Ecosystem

    Discover the strategic partnership between Lisk and the Indonesian Ministry of Communications and Informatics, aimed at propelling local Web3 startups to new heights through comprehensive support and education.

    Executive Moves

    Admirals appoints founder Alexander Tsikhilov as CEO

    “Striking the right balance between sourcing new talent and developing and harnessing the strength and capabilities of our current workforce, is key to achieving our vision.”

    <