The almost certain prospect of a digital advertisement ban on binary options, forex and CFDs products in France has triggered the creation of an industry association of forex and CFDs brokers in the country. The Association Française des Courtiers et Prestataires de Services d’Investissement (AFCOPSI) has been created to represent the interests of the legitimate industry in the country and its clients.
After a number of years of offshore brokerages abusing French clients, this week the Autorité des Marchés Financiers (AMF) announced that the prospect of an advertising ban in France are very real and that it will launch a consultation period lasting two months to gather feedback from the industry.
Brokers which have been locally represented for years have grouped into an industry association, sources with knowledge of the matter have shared with Finance Magnates. The initial members of the AFCOPSI are CMC Markets, FXCM, IG, WHselfinvest and XTB. All of the companies have on-the-ground offices in Paris.
Advertisement Ban Votes Incoming
Unlike the bigger markets in Europe, France has been widely attacked by offshore brokers in the past years. The fraud triggered a number of complaints from clients of these entities, some of which have been licensed by the Cyprus Securities and Exchange Commission (CySEC).
After a number of years of increasing complaints to the AMF, the regulator was forced to act. Within a period of two months, after the consultation with the industry is concluded, the final details of the advertising ban will be announced. The prospects for now look grim, as the regulator is proposing a 1:5 cap.
The French Senate and the National Assembly are going to vote on the law in the coming months with more clarity on the matter expected in October. The law would give the AMF the authority to ban advertisements on a list of products, but in itself it does not define the list of products.
What You Need to Know About Trading the Energy MarketGo to article >>
The AMF has currently taken a stance that any level of leverage above 1:5 (earlier Finance Magnates incorrectly reported that the level was 1:20 or 5%) will be falling into the category of risky products that need to be banned.
Offshore Brokers Account for over 98% of Complaints
Throughout 2015, 1617 complaints directly related to FX and binary options were brought to the AMF according to its annual report. Of these complaints, 228 were handled by the AMF’s ombudsman, with the remaining 1389 complaints coming from unregulated brokers, which have been directed to the police.
According to the 2015 Ombudsman AMF report, 85 per cent of the 228 complaints which were handled by the AMF came from brokers based in Cyprus, totaling 194 complaints. The remaining 34 complaints from other brokers could comprise of AFCOPSI members, but not necessarily; this small number of unhappy clients that is nothing out of the ordinary, and is in line with industry averages even in stricter jurisdictions like the U.S. or Japan.
French Advertisement Ban Could Backfire
With the maximum number of complaints relating to locally represented companies that have committed to the market, authorities will be effectively introducing limitations on the only players on the market that are providing a service which is in line with the regulatory framework.
The bulk of unregulated brokerages will continue operating unscathed and may as well continue with their abusive practices of cold calling and high-pressure sales tactics, strategies which the regulated brokers that have committed to the French market have not been employing.
Looking at ‘Investment Trends 2016 France CFD/ FX Report’ numbers, there are about 22,000 clients in the country. If amongst those there are 34 complaints, this means that only 0.1 per cent of traders are unhappy with the services of brokers that are based in France.
The issue is that the AMF ruling is going to impact all brokerages that are operating on the market. Offshore brokerages that have already been operating on the market are unlikely to be materially affected by the law and they will continue their fraudulent operations unscathed.