The Netherlands Authority for the Financial Markets (AFM) issued its annual report for 2016. The watchdog has highlighted the risks associated with some retail investor-focused products. Binary options, forex and CFDs contracts have been designated as “harmful investment products” and measures are expected to be taken by the Dutch government on limiting advertising.
The AFM has highlighted that the main reasons for the advertising ban is the disproportionate level of risk of losses for retail investors. The regulator is also concerned that clients may end up having residual debt as a result from excessive moves in the markets.
To back up its decisions, the Dutch AFM is citing a study from the French regulator Authorite des Marches Financiers (AMF). The review that was conducted in 2014 by the financial sector supervisor in France found out that an average of 89 percent of investors lose money while trading CfDs and forex for an average loss of €10,887.
The AFM is also citing a study by the UK’s Financial Conduct Authority (FCA) that shows 82 percent of investors suffered losses.
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Aggressive Marketing to Force a Ban from Mid-2017
The Dutch financial supervisor is expecting that the high-risk investment products will be banned from all advertising channels, starting from the middle of 2017. The Dutch Minister of Finance Jeroen Dijsselbloem expressed his worries publicly in September last year.
Since then the AFM started exploring the options how to enact an advertisement ban that culminated in an announcement in February that started a period of consultation with the binary options, forex and CFDs brokers.
A working group at the European Securities Markets Authority (ESMA) that is addressing the use of such products has been formed as a result from the public outcry on part of many EU residents.
The Dutch regulator finalizes the mention of binary options, forex and CFDs brokers with the highlight that it has been actively supporting the Cyprus Securities and Exchange Commission (CySEC). The progress with enforcement measures which the Cypriot supervisor is making has also been outlined in the annual report of the AFM.