Almost a year after the ESMA’s new regulatory framework in Europe took effect, the number of unregulated entities offering services to European clients continues growing. In its latest effort, the Cyprus Securities and Exchange Commission (CySEC) continues its attempts to flag unregulated websites offering financial services.
In its latest announcement, the Cypriot regulator lists seven new websites which are in some way connected to the island or purporting to be based in Cyprus. The websites are binarytradeoption.com (offering binary options), expatfxtrade.com (CFDs and forex), parifxtrade.com (CFDs and forex), fx-premium.com (CFDs and forex), tqrtrade.com (CFDs and forex), 247smartfx.com (forex and CFDs), and 247btcclub.com (cryptocurrencies).
Spanning across binary options, CFDs, forex, and cryptocurrencies, the entities flagged by the CySEC are mostly purporting to be based on the island. The CySEC outlines that none of the entities operating the sites has a license to do so and warns consumers to verify the list of regulated entities via its website.
Cyprus-Based Unregulated Firms
The number of companies based in Cyprus that are not regulated in any way shape or form has been growing since last year. The exodus of the regulated industry on the island has been exacerbated by the tough regulatory framework imposed by the ESMA last August. As a result, a number of companies have been illicitly targeting EU-based clients via unregulated companies.
While the local regulators are doing everything in their power to limit the impact of such operations, a number of local players are running operations for offshore brokers. With the legality of such operators remaining undressed by the MiFID II regulatory framework, a big chunk of the EU retail forex and CFDs market has now unofficially shifted offshore.
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While the US and Japan are more strict when allowing its citizens to deal with companies which are not regulated in those countries, EU legislators have not closed the doors for such operators. While a big number of firms have regulated subsidiaries in Australia and have been welcoming their EU clients via ASIC-regulated subsidiaries, the practice is getting close to an end.
Clone Sites and Misleading Claims
With the number of unregulated companies exploding in recent quarters, so have the misleading tactics used by such operators. With call centers based outside of the EU, they are frequently purporting to be regulated or even based in Europe.
Customers are to exercise extra vigilance when dealing with cold-calls and should avoid opening accounts with unregulated entities. The Cypriot regulator, alongside other national financial industry supervisors across the continent is hard at work to flag as many illicit websites as possible.
That said, their success rate is most frequently contingent on the rate at which clients report abuse from such unregulated entities. Customers of financial services globally are advised to confirm all of the information provided on the websites of unregulated brokers with national regulators.
To combat unregulated operators, the CySEC has proposed the introduction of three tiers of leverage for retail clients, reaching up to 50:1 for some customers. The regulator has also pledged that is is going to continue increasing the number of staff on hand in order to ensure compliance on part of regulated companies.