France’s AMF clarifies scope of ban on advertising of toxic investment instruments

Almost one year has passed since the Sapin 2 law introduced a ban on digital advertising of certain investment products, such as binary options, to French investors. France’s financial markets authority (AMF) has just provided some clarification on the scope of the ban.

In the Q&A document, published today, the regulator confirmed that the ban applies to digital advertising (banners, popup windows, emails, search engine ads, webinars, elearning, social media ads, remarketing, etc) of products that imply a risk of losses that are higher than the initially invested sum. The ban, the regulator explains, covers all types of binary options but does not apply to vanilla options.

The ad prohibition does not cover all types of CFDs. The CFDs that have consumer protection, that is, that guarantee that the loss cannot exceed the sum invested, can be advertised. In such cases, the ad should explicitly state the presence of such protection and to outline the risks associated with such a type of investment. The advertisements of such CFDs should not redirect to ads of products that are prohibited by the law.

The broker may provide information on its website but the ban will cover all other websites other than its main website. The prohibition applies to social media pages of a broker. Of course, the information on the website should comply with a number of requirements such as the one that the information should be clear, exact and not misleading.

Only digital ads that target non-professional clients are covered by the rules. By contrast, digital communications of promotional nature addressing professional clients is authorized. In such cases, the professionalism of such clients should be certain, that is, the broker should be able to prove the professionalism of these clientele.

An interesting exception to the ban concerns cases when the investors request the information themselves. In such cases, the broker should preserve the elements of communication (letters, emails, telephone recordings, etc) proving that the information request came from the client.

AMF reminds that all sponsorship and partnerships related to the offering of the products whose advertising is banned is prohibited. The maximum fine for the breach of this ban is EUR 100,000. This is the famous clause that banned all sports sponsorships by companies like binary options brokers.

In the face of this detailed explanation, AMF has stopped short of penalizing the brokers that break the advertising ban. In October, Robert Ophèle, Chairman of AMF, quoted statistics showing that the number of new advertisements about online trading of toxic products distributed after the Sapin 2 law came into force reached 162 at the end of August. A total of 28 providers of online trading services were responsible for these advertisements. Of these 28 companies, 26 were registered in an EU member state other than France. Of these 26 brokers, 19 were Cypriot, a fact that the AMF Chairman called barely surprising.

AMF has turned to the companies that break the law, demanding that they withdraw their ads – the majority have complied with the regulatory demands. Nevertheless, certain Cypriot companies have shown reluctance to comply with the law. The regulator had considered evoking MIFID article 62, in order to prohibit the activities of these companies in France but decided not to apply this rule and instead to wait for the coming into effect of the new MIFID II and MIFIR rules – their entry into force is less than a couple of months away.

The new rules will allow ESMA to prohibit the marketing of financial products across the European Union for a period of three months for purposes of consumer protection. National authorities will be allowed to ban such activities for an unlimited period of time within the particular EU member state.