BaFin Says Cypriot Brokers Responsible for 50% of Detected Infringements

Germany’s Federal Financial Supervisory Authority (BaFin), announced today that most CFD brokers from Cyprus do not use the prescribed risk warning correctly. The authority reviewed 40 CFD providers from Germany, Cyprus, UK, Malta, Luxembourg, the Netherlands, and Ireland.

According to the official document shared on its website, Bafin states that the most recent review was conducted in August 2020 and the authority discovered violations (mainly related to the prescribed risk warnings) in 49% of the CFD providers. Only 32% of the reviewed CFD providers fully considered the general injunction.

The regulator mentioned that out of the 40 CFD providers reviewed, nearly half of them were based in Cyprus, 12% from the UK, and 29% from Germany. Most of the detected infringements were related to not formulating the risk warnings according to the requirements or not providing risk warnings at all.

“The greatest difficulties in correctly implementing the requirements of the CFD product intervention measure appear to be due to Cypriot suppliers. BaFin found infringements for one in two suppliers checked in that EU country. BaFin also found infringements from CFD providers based in the UK, Germany, and Luxembourg, as well as in other EU countries such as the Netherlands, Malta, and Ireland. However, Cypriot suppliers were responsible for around 50 percent of all detected infringements”, BaFin states.

Risk Management and Leverage

According to the regulatory authority, almost 70% of the violations were related to the risk warnings, followed by 13% related to the leverage limitations. Approximately 9% of the companies tried to lure investors to trade CFDs with bonuses. “BaFin draws the German suppliers’ attention to the infringements found and introduces administrative coercive measures if they do not remedy the deficiencies found. BaFin cannot take immediate action against foreign companies offering retail investors in Germany with the European CFD passport. It shall pass such cases on to the relevant foreign supervisory authority. The latter then pursues the infringements in the context of its own supervisory activities,” the official document mentioned.

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