The European Securities Markets Authority (ESMA) has published a new addition to its regulatory Q&A dedicated to providers of foreign exchange, CFDs and binary options brokers.
The document has been amended to include a section that clarifies the supranational regulator’s stance on passporting and the cross-border provision of financial services to retail clients.
The document is also addressing the use of affiliates by brokers and provides guidance to national supervisory authorities on how to oversee such entities.
The detailed clarifications can be found in the embedded document at the bottom of this article (pages 84 to 96). Key takeaways include that companies cannot provide MiFID services via their representative offices in other countries. Brokers are only allowed to conduct market research and promote the brand of the firm.
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As to affiliates, the document is highlighting that they need to be adhering to regulatory requirements at all times. ESMA states that on numerous occasions affiliates have been providing investment advice and/or money management services. Brokers are encouraged to closely supervise the activities of any third parties that are connected to their operations.
The national regulators of the EU member states are strongly encouraged to exercise supervision over the activity of the brokers outside of the home country where they are regulated.