The coming quarters could make business for retail brokerages in France much tougher in light of the latest report by the French regulator to the country’s Parliament and President Francois Hollande. The national regulator, the Autorité des Marchés Financiers, intends to introduce a ban on online advertising for forex and binary options brokerages.
According to the 140 pages long report, fraudulent forex and binary options brokerages have solicited close to €4 billion from French residents throughout the past 6 years. The joint efforts by a number of French regulatory agencies has failed to produce adequate results and the number of complaints by French residents has been rapidly climbing since 2011.
The country is preparing a draft of regulations that will forbid active advertisement of risky financial trading products online. The draft has been a long time coming, however its implementation would be difficult to say the least.
Aside from blacklisting brokerages, the French financial regulator AMF would have to keep track of affiliate websites and the strategies that those are employing to solicit clients to trade on the financial markets.
ESMA to Focus on Supervision Strategy Between 2016-2020
The AMF has been one of the most active regulators when it comes to revamping the way that leveraged financial trading products have been advertised to retail investors. The pressure exerted by French authorities has ultimately prompted the European Securities Markets Authority (ESMA) to induce other national regulators to tackle the misconduct of companies that are passporting their regulatory licenses across the European Union.
The number of complaints that have been registered by French authorities in 2015 has reached 1617. The figure was higher by 25 per cent when compared to the previous year, reaffirming a rapidly increasing rate of online fraud related to retail trading products.
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The revelations that the FMA has made in its report are likely to cause increased regulatory scrutiny across the European Union due to the establishment of a common framework for supervision of market conduct by brokers, which is one of the main focuses of the the 2016-2020 strategy of the ESMA.
With the diligence of supervision still differing too much between different EU states, the establishment of a common framework has been one of the main missions of the AMF.
The regulatory findings from a study in 2014 that 9 out of 10 clients registered losses on their retail trading accounts over a period of 4 years, has prompted an extensive campaign by French authorities to increase public awareness about the dangers related to trading on the financial markets.
French Online Advertising Ban Vote in 2016
While forex and CFDs traders have had a small chance to retain their account balances, the same can not be said about clients trading binary options. The MFA proposed to the Minister of the Economy and Finance to devise a legal framework to ban advertising on the “most toxic products”.
An upcoming bill has been submitted for discussions in Parliament and according to the AMF it will be voted on in 2016. According to the regulator’s report, the proposal has been very well received by legislators. The French watchdog also states that it is aiming to promote similar supervisory practices in conjunction with the ESMA at a European level.
As of the end of 2015, the number of blacklisted brokerages that have been included by the AMF in its regularly updated catalogue have reached 74 forex brokers and 255 binary options related firms.