MFSA Announces Permanent National Restrictions on CFDs

The product measures are the same as the temporary rules imposed by ESMA for retail investors.

The Malta Financial Services Authority (MFSA) is the latest European regulator to implement product intervention measures against contracts-for-differences (CFDs) on a national scale. 

The authority announced this Tuesday that it has updated its Conduct of Business Rulebook to essentially restrict the marketing, distribution or sale of CFDs to retail investors. 

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The measures implemented by the Maltese watchdog are the same as the temporary measures previously implemented by the European Securities and Markets Authority (ESMA).

As Finance Magnates reported, ESMA stopped renewing its temporary measures on August 1 this year. Since then, almost all European regulators have more or less copied the temporary measures which were in effect for one year.

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The permanent restrictions introduced by the MFSA include requirements that ensure investors do not lose more money than what they put in. To achieve this, the regulator now mandates that investors must be provided with understandable risk warnings, and restrictions on certain incentives to trade CFDs have also been put in place.

According to the statement published today: “During the last years, the European market has witnessed a rapid increase in the marketing, distribution or sale of CFDs to retail clients across the EU. CFDs are inherently risky and complex products.”

“European regulators have expressed widespread concerns on the increasing number of retail clients trading in these products and having them losing their money. These concerns are also supported by the numerous complaints received from retail clients across the EU who have suffered significant losses when trading CFDs.”

ESMA approves MFSA regulations

On July 30, ESMA responded to the Maltese regulator’s proposed measures, stating that they are the same as ESMA’s on a national level. Overall the regulator concluded that “the national measures are justified and proportionate.”

Commenting on the measures, the MFSA’s Head of Conduct Supervision Dr Michelle Mizzi Buontempo, said: “these rules, in line with the MFSA’s Vision, seek to strike a balance between the market’s need to provide fair competition and client choice, while at the same time protecting consumers of financial services, and safeguarding the integrity and stability of the financial system.”

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