Spain CNMV Clarifies Disclosure Requirements for CFD Brokers


In its latest issued circular, Spain CNMV clarifies disclosure requirements for CFD brokers and Binary Options brokers. The circular aims to boost the transparency of offering and provision of these complex financial products to investors.

16 March, AtoZForex - The Spanish financial markets watchdog, the Spanish National Securities Market Commission (CNMV) has issued a circular on its website that aims to clarify the requirements in relation to the disclaimers and warnings about the risks associated with particular financial investment products. These include Binary Options and contracts for difference (CFDs).

Spain CNMV Clarifies Disclosure Requirements for CFD Brokers

The CNMV has published a circular that details the requirements for the disclaimers. It aims to boost the transparency of offering and provision of these complex financial products to investors.

Specifically, the circular explains that when signing a contract with a brokers, a clients will be required to sign a special warning, which has to be provided by the broker. The warning will need to state the following:

“You are about to buy a product that is not simple and that can be difficult to understand: (the product should be identified). The National Securities Market Commission (CNMV) considers, in general, that due to this product complexity, its acquisition is not suitable for retail clients. However ZZZ (name of the entity) has evaluated the client’s knowledge and experience and considers that it is convenient for you. “

Moreover, there is another requirement that Spanish regulator draws our attention to. In cases where the retail customer is facing financial commitments for an amount greater than the initial investment in the financial instrument, the second paragraph of the warning should state:

“This is a product with leverage. You should be aware that the losses may be greater than the amount initially paid for this purchase.”

In addition to the abovementioned, clients will need to submit the following handwritten text:

“Product difficult to understand. The CNMV considers that, in general, it is not suitable for retail investors”.

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What is the purpose of these requirements?

The key purpose of these measures is to solidify investor protection across Spain. Also, the CNMV aims to prevent situations in which clients of brokers sign up for services and products that do not have a clear understanding of.

Back in March 2017, the CNMV has required CFD, Binary Options and Forex brokers to issue detailed warning to the clients. The entities needed to get some kind of written or oral consent from a client that would indicate that they were aware of what they are getting into.

The recent CMNV’s update does not require anything new in particular. It aims to just clarify the specific language that the regulator requires in warnings issued to clients.

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