BaFin Criticizes Cypriot Brokers for Non-Compliance


German regulator, Bafin has criticized Cypriot CFD brokers for non-compliance with regulations regarding the risks associated with trading CFDs.

December 18, 2020 | AtoZ Markets – The German federal financial supervisory authority (BaFin) on Friday said that Cypriot CFDs brokers regulated by other European Union countries do not comply with local German regulations.

According to BaFin, it imposed five restrictions on the CFDs brokers last year, especially in the marketing, distribution, and sale of these instruments to retail clients in Germany.

Still, many brokers are easily operating in the German markets without following the regulations.

“One still finds providers, especially from other EU countries, seeking to attract clients in Germany with CFD offerings that are actually illegal. All they need is the permission of their home country supervisor and a German-language website,” BaFin stated.

CFDs brokers choose Cyprus

The German regulator further said that most of the Cyprus regulated brokers are not complying with the local regulations.

“The providers having the most trouble correctly implementing the CFD product intervention measure are evidently the ones from Cyprus,” BaFin added.

Although EU-regulated brokers, including Luxembourg, Germany, and even the UK, violated the local Geman compliances, Cypriot brokers were responsible for about 50% of all detected infringements.

BaFin Criticizes Cypriot Brokers for Non-Compliance

Also, according to a survey conducted by BaFin, 48% of the CFDs providers are domiciled in Cyprus, while only 29%  are supervised directly by BaFin itself.

Bafin also added that70% of brokers failed to show mandatory risk warnings to the traders. Furthermore, brokers violate the leverage limitations and bonus restrictions set by the German regulator.

“BaFin makes German providers aware of the infringements identified and initiates administrative enforcement measures if they do not remedy the deficiencies found,” the regulator noted. “BaFin cannot directly take supervisory action when foreign companies utilize the European passport to offer CFDs to retail investors in Germany.”

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