The National Securities Market Commission (CNMV) is once again tightening the siege to curb the high trading of contracts for differences (CFD) among retail customers. A high-risk financial product that, according to the regulator, generates losses for a large part of the 60,000 Spaniards, between 70% and 90%, who currently have them contracted.
Both the CNMV and the European Securities Markets Supervisor (ESMA) have been warning of the complexity and high risk of these products for years. Faced with the evidence of the fact that the marketing restrictions, which were already issued in 2018 and 2019, have not served to prevent that there are still too many customers who contract this product without the appropriate profile to assume the losses it produces, the CNMV issued a resolution yesterday to intensify this control. In particular, it has prohibited advertising of CFDs if it is intended for retail clients and the general public.
This prohibition extends to event and organization sponsorships and brand advertising, including the use of public figures by entities trading CFDs. The two types of communication will only be permitted when the activity is very small compared to the general activity of the entity.
In the resolution published this Wednesday, the CNMV has also defined the remuneration policies and sales techniques for these products. Practices such as remunerating the commercial network depending on the number of customers acquired or the income or losses that these customers bring to the entity issuing the financial products are prohibited.
In turn, the use of call centers, webinars in which training is offered to new customers to use these products, as well as demonstration accounts, which encourage the distribution of these products to retailers, is prohibited. “With these measures, it is intended to strengthen the protection of the investor against certain commercial and advertising practices in the CFD offer that had prevented the regulations and intervention measures in force until now from being effective”, the CNMV pointed out yesterday in a communicated
With respect to the rest of the high-priced products, the maximum debt to which investors can be exposed has been limited and the protection of closing margins is mandatory. This means that customers who take on debt will see their positions closed when they drop to 50% of the initial collateral, which will limit their losses.
These measures will mainly affect eight Spanish entities, which concentrate the majority of the trading volume, which recorded aggregate losses of 70 million euros in 2021, the date of the latest available data. The volume traded through CFDs that year was 155,000 million euros.
