The Official State Gazette published, on 14 July 2023, the Resolution of 11 July 2023 of the Spanish National Securities Market Commission (‘CNMV’) on product intervention measures relating to financial contracts for differences (‘CFDs’) and other leveraged products.
These measures are in addition to those already approved by the CNMV for 2019, which made the marketing of CFDs to retail clients subject to compliance with a number of conditions, including: (i) a limit on the maximum permitted leverage, depending on the type of underlying; (ii) protection of the closing of the position and negative balances; and (iii) the inclusion of a predetermined warning of the risk associated with this type of instrument.
The Resolution will apply to entities authorised to provide investment services in Spain in respect of all marketing, distribution and sale of CFDs and other leveraged financial instruments to retail investors in Spain, regardless of the entity’s origin and whether or not it has a branch in Spain.
The measures taken by the CNMV focus on the prohibition of CFD advertising aimed at both retail clients and the general public, including the following communications:
- Those redirecting to websites offering CFDs.
- Those that refer to a contact form, the download of an application or any other means that is intended to put the client in contact with a provider offering CFDs.
- Those offering courses, training, workshops, or seminars related to CFDs, or demo accounts or similar training tools or that promote investment in such products, where they are offered free of charge or at a nominal fee.
This does not apply to any provision of information in relation to CFDs in response to a request at the sole initiative of the client, although in such a case, the CFD investment service provider would be responsible for maintaining evidence that the initial request did indeed come from the client (e.g., by recording and archiving letters, e-mails, or recordings of telephone calls).
Similarly, the provision of information that is necessary to contract CFDs, such as the provision of pre-contractual and contractual information necessary for the transaction, will not be considered as marketing communications.
In addition, the CNMV also includes in this Resolution the prohibition of sponsorship of events or organisations and brand advertising, including the use of persons of public relevance, when their objective or effect is the direct or indirect advertising of CFDs; as well as the prohibition of certain commercial practices, such as, among others, the remuneration of clients to bring in new retail clients and the use of call centres to attract clients to invest in CFDs.
Finally, the Resolution also incorporates other restrictive measures that apply to leveraged instruments other than CFDs, which make their marketing to retail clients subject to compliance with the following conditions: (i) a limitation on the maximum permitted leverage, depending on the type of underlying; and (ii) position close-out protection.
In particular, the scope of application of the Resolution is extended to the case of CFDs or leveraged financial instruments whose underlying is a crypto asset that is not considered a financial instrument subject to MiFID regulations, in which case, the restrictive measures will also apply when Spanish entities operate in other Member States of the European Union.
This Resolution will apply from 3 August 2023, although a transitional period is established for sponsorship or brand advertising contracts agreed prior to 14 July 2023, until their first expiry date, without the possibility of extending them. Notwithstanding the foregoing, in no case may such contracts be extended beyond 14 July 2024.