Poland is taking some proactive measures to limit access to the market for unauthorized forex brokers. Marek Chrzanowski, the Chairman of the Polish Financial Supervision Commission, shared with the ministry of finance a draft of the Act on Financial Market Supervision, which was prepared by the Polish Financial Supervision Authority (KNF).
The regulator has identified increasing risks for retail clients in Poland, stemming from companies that are not regulated in the country. Such providers have been ruthlessly targeting clients in the country without adhering to ethical and regulatory standards.
The KNF will be granted the power to prevent the provision of financial services by such companies. The watchdog will be empowered to regularly update and maintain a list of unregulated companies that are targeting Polish clients and ban their access to the market via internet service providers.
Tackling an old problem
A number of countries in and outside of the European Union have been targeted by unauthorized brokers for years. Such companies use aggressive hot sales tactics and numerous schemes to attract clients.
The KNF appears to be the first to actively engage in filtering traffic from such unregulated websites to protect retail clients in the country.
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After the completion of an inspection entitled “Protection of unprofessional participants in the foreign exchange market”, the financial supervision authorities in Poland identified significant gaps in the existing framework. A couple of years ago, the KNF was the first European regulator to officially introduce a cap on leverage, at 1:100.
Since then, the main problem for retail clients in the country have been entities that are not regulated by nor based in Poland. Such companies are typically based offshore and very difficult to trace.
Criminalization and fines
Unregulated brokers will be identified by the KNF and their names will be publicized in a public alert list. The list will include internet domain names that are used by the unauthorized entities to provide financial services. The KNF will then proceed to enter the domain name into the restricted domain register.
Subsequently, internet service providers in Poland will block access to the domains. The country has already been using similar measures to ban betting and gambling sites.
Current laws allow Polish authorities to fine companies that operate unlawfully up to PLN 5 million ($1.26 million). The KNF is proposing to double the maximum fine and criminalize such activities.