France’s AMF fines XTB €300,000 for compliance breaches
Publicly listed Polish FX brokerage XTB has been hit with a €300,000 penalty to settle charges brought up by France’s regulator over a string of compliance breaches.
XTB’s French subsidiary was accused of publishing misleading adverts and failing to carry out proper due diligence on new clients.
The Autorité des Marchés Financiers said today that it had issued XTB the fine for numerous breaches of regulation between November 2013 and February 2020.
During a review of XTB’s compliance over the period, the AMF found that X-Trade Brokers had breached its restrictions on selling contracts for difference (CFDs) to retail clients. The watchdog added that the broker hadn’t put appropriate risk warnings on its website, seemingly tweaked some of the wording used in its marketing materials. In Europe, the CFDs regulations impose a standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.
“XTB France had breached the prohibition on sending promotional messages concerning the provision of investment services relating to certain financial contracts such as CFDs to clients who were likely to be retail clients. It also found that a number of Google ads placed by this provider did not contain a visible, clear and precise statement of the risks of capital loss inherent in CFDs,” the AMF said.
France’s mega regulator also said it found that XTB France did not carry out the proper procedures when evaluating the level of knowledge and expertise of new clients. Additionally, the firm was found in breach of ESMA’s rules concerning the classification of clients, possibly to allow retail investors turn around its tough restrictions and obtain access to CFDs trading.
In some instances, XTB France’s questionnaire to assess the client’s knowledge and experience was inadequate and that “the calculation algorithm associated with this questionnaire did not make it possible to determine whether the client or potential client had the level of experience and knowledge required to understand the risks inherent in the product or service being offered.”
Lastly, XTB France has been fined for not informing its clients about a technical glitch on its platform that resulted in a “material difficulty” to handle their trading orders.
The AMF, however, acquitted XTB in other alleged breaches including “the insufficient font size of the warning messages in its commercial banners.” The broker was also cleared of claims that it uses inadequate wording in the general terms and conditions of its brokerage service.
Since 2019, the AMF and many European regulators have up with country-level permanent restrictions against CFDs and binary options even as every EU member had the right to implement its own rules tailored to their national markets.
The rules also mandate negative account protection, ensuring that customers can’t lose more than their trading stake. Finally, the current regulations forbid bonuses and other incentives that may have encouraged overtrading in recent years. For brokers, the biggest blow has been ESMA’s decision to limit how much leverage they can offer to their clients to juice up bets.