It was a big day today for the CySEC licensed brokers. During what was meant to be a secret meeting, Demetra Kalogerou CySEC Licensed Brokers appeal appeared to be strong yet slightly confusing. Who is guilty? Brokers? IBs? Or the CySEC management?
04 April, AtoZForex - I tend not to write about the industry publicly, however there are occasions, such as today, I just can not stop myself talking, analyzing and writing. Unfortunately, I just returned back from South Africa today, hence could not make it to Cyprus earlier to catch Demetra Kalogerou CySEC Licensed Brokers appeal live.
You should be ashamed of yourselves
This is more or less what we could take away from today's speech from CySEC chair Demetra Kalogerou during her CySEC Licensed Brokers appeal. Furthermore, she focused on one main point - the IBs and Affiliates.
Indeed this is a very sensitive subject and I do agree that most brokers intentioally have failed to control their IBs and Affiliates. As I mentioned, I was in South Africa over the weekend. During my trip to Johannesburg I met a number of IBs, Affiliates, Trainers, Brokers, Journalists, Traders and even undercover FSB representatives. It was really terrifying! How do some of the CySEC licensed brokers have intentionally targetted a non-EU country, just like what Demetra Kalogerou said in her comments.
"There are real concerns that products are not appropriate and are too risky for retail investors who are unable to understand the risks of the products being offered. For example, in 2016, 90% of binary clients lost their money. 70-80% are losing money on FX. These percentages are too high. These should be brought down”
IBs give guarantees
I wish I was in this meeting today. I would be able to give direct names of brokers who work with IBs that are connected to churches in Nigeria. IBs that show off with leased Lamborghinis and tell that there is no risk. Even, I have had a CySEC regulated Binary Options broker calling me (yes I did a shadow client test) and telling me that he guarantees 50% return a month if I "invest" in Binary Options.
Indeed, let me break it clear. Neither the money put in Forex nor Binary can never be classified as an investment. Especially, if a person on the other side of the phone is an unemployed father of two living on social welfare. This guy barely makes the ends meet, yet alone, he could have savings to put in Forex? I am not even talking of Guarantees. How can a representative of a regulated entity give guarantees?
Demetra Kalogerou CySEC Licensed Brokers appeal
Enough is Enough. Or as they say in South Africa - Genoeg is genoeg!
Brokers must stop empowering the greed of their IBs and Affiliates. Forex Scammers offer 1000% return in a month with grid EAs in return for $300 CPA deals. Brokers, keep on nagging site owners pushing them send newsletters with their product offers. Not only that, Scam Trainer IBs are so corrupt that they provide ordinary people trading certificates after they show what is a moving average.
“These products are sometimes promoted in a very aggressive way, and we have said that for 2 years. Stop it!”
I would have loved to stop Mrs. Demetra Kalogerou with her comment above. Binary options brokers are always promoting this gambling product extremely aggressively. Forex brokers often push so much pressure on 18 year of fresh high school graduates that they break their piggy banks for the hope! This is indeed the reason why Belgium, France, Holland, Germany, Denmark and Spain have been banning and restricting CFDs advertisement.
“We have checked the supervisory action plans, and the IBs give investment advice. They sit with their clients, they give unauthorized advice and misleading information and there is no control over them or affiliates. You cannot control affiliates. How do you know what they are advertising, do you have their full procedure? There is no way of controlling expansions in countries like that, therefore if you cannot exercise proper control, you should not expand into those regions.”
It was rightly said that "10 out of 27 regulators are already taking measures against retail electronic trading in that these products are not appropriate for retail investors". Maybe it is about time that CySEC looks within too?
Intervention powers will be invoked from January 2, 2018
It is indeed the first time I've seen something so serious from CySEC. The tone of the appeal, the structure of the comments, it was all organized implicit messages for every participant.
"Intervention powers will be invoked from January 2, 2018. You have 9 months to think about it.
In the meantime, in line with the investor protection rulings, each one of you is expected to ensure a program of responsibility. Thereby you can see what investors are appropriate for the product. You can refuse investors if not appropriate. You cannot pass everyone”
Mrs. Demetra Kalogerou most of the Binary Options brokers, if I could call them brokers have started targeting universities. Those young students not only have no idea about the market and definetly are not aware of the simple risk disclaimer:
"Trading on leverage carries high level of risk. You should never invest the money you can not afford losing."
Misleading broker guarantees
This was a personal discussion between me (with a fake name) and a sales rep from a binary options sales person:
Yagub: - I am a student. I don't have much money. Is this Binary thing even secure?
Binary Options sales: You can even start Binary options with $50. And, this is so secure that even bankers are doing it. I know people making millions and I know you would enjoy being a millionaire too.
Yagub: Can you guarantee me results?
Binary Options sales: Yes. Deposit $10,000 or more I will give you 40% bonus and trade for you personally. I will make you a millionaire.
Yagub: I don't have that money. I need to ask my dad.
Binary Options sales: Don't just ask your dad, bring him too! Your mum will love him even more!
I am very sure the above given sales person was calling me via a call center outside Cyprus. He had a strong Bulgarian accent and did not have any slight compliance clue on what he was talking about. Rightly so, Call center coverage of Demetra Kalogerou CySEC Licensed Brokers appeal said the following:
“I cannot stand call centers. Especially those which are not regulated!”
She went on commenting that it is best to ban all call centers and educate Account Managers globally.
“We do not like call centers, especially those not regulated. It is better to ban call centers altogether. Now, if you want to have a sales team, or account managers in your regulated firm, then that’s all very well, but they must be operated by educated staff who pass CySec exams. We will be introducing new exam in 2017, and companies must expect to be reporting all the time and you must monitor them and hear what they are saying. If the sales force of your firm is based in another region, then the same monitoring must apply, and the staff must pass the same pass exams, be equally educated and there should be a specific responsible person to monitor the people there on site.”
Cold calling Forex brokers
Mrs. Demetra, I wish you could knew that there are brokers operating in the heart of Limassol calling people in Hungary, Poland, Czechia via yellow pages. Cold calling is by law against the law in western Europe. It is an offense in Germany as an example. Even for Germany, these scamsters find their ways as they all use voip phones. Every caller is appearing as if he is in London.
“This is a warning, and I will close down problematic companies which have many complaints. I will need to get approval from third countries first or a legal opinion and I will not allow mirror companies in offshore jurisdictions to offer products to non EU countries under the same shareholders and get complaints from the offshore regulator such as Belize Bahamas, or the Cayman Islands. Additionally I will ban the shareholders as not fit and proper.”
Demetra Kalogerou CySEC Licensed Brokers appeal summary
If I were to look into Demetra Kalogerou CySEC Licensed Brokers appeal summary, it would be as the following:
- Restrictions coming up for the Affiliate and IB systems
- CySEC is likely to apply licensing for IBs and Affiliates
- All unregulated call centers will be completely banned
- Say good bye to bonuses overall
- All broker employees will be forced to be licensed - take CySEC exams
- Binary Options products are likely to be banned completely
- Marketing techniques of every broker will be reviewed
- Brokers are likely to ask for legal opinion for every country they target
This is the first time I have personally seen something decisive from CySEC. How will the industry be impacted after tough Demetra Kalogerou CySEC Licensed Brokers appeal? Will it be the beginning of stronger CySEC?