This Q&A includes a new section 10 – pages 84-96 – and provides clarifications on:
• Passporting and the cross-border provision of services by investment firms offering CFDs and other speculative products to retail clients;
• Assessment of the use of third parties by investment firms; and
• Examples of poor practice observed by NCAs in respect of the use of third parties by investment firms.
Many competent authorities have concerns about the protection of investors in this area and the purpose of the Q&A is to promote common supervisory approaches and practices in the application of MiFID and its implementing measures to key aspects that are relevant when CFDs and other speculative products are sold to retail clients.
The complexity of CFDs and other speculative products means it may be difficult for the majority of retail investors to understand the risks involved although they are widely advertised to the retail mass market by a number of firms, often via online platforms. There is also a considerable degree of cross-border activity across Europe in these products.
In addition to these Q&As, ESMA will also consider the need for any further work in light of MiFID II requirements that will enter into application in 2018.