The Danish Financial Supervisory Authority has on 1 August 2019 adopted a decision pursuant to which the marketing, distribution and sale of CFDs to retail customers is being restricted. For more information, read our brief legal update on the decision.
The Danish Financial Supervisory Authority (the FSA) has on 1 August 2019 adopted a decision pursuant to which the marketing, distribution and sale of contracts for difference (CFD) to retail customers is being restricted. The decision which has been approved by the European Securities and Market Authority (ESMA) pursuant to an opinion dated 23 July 2019, seeks to address certain investor protection concerns relating to CFDs being marketed and sold to retail clients and lies in continuation of the temporary product intervention measures adopted by ESMA.
Pursuant to the FSA decision the marketing, distribution and sale of CFDs to retail clients in or from Denmark is prohibited unless the following conditions are met:
the financial institution offering the CFDs (the CFD Provider) requires the retail customers to pay initial margin protection in accordance with the relevant initial margin requirements;
the CFD Provider provides retail customers with margin close-out protection;
the CFD Provider offers the retail customers negative balance protection;
the CFD Provider does not offer, directly or indirectly, the retail customer a payment, or any other monetary or non-monetary benefit in connection with the marketing, distribution or sale of a CFD, other than any potential profits in respect of the CFD as such; and
the CFD Provider does not directly or indirectly communicate or disclose information that is available to a retail customer regarding the marketing, distribution or sale of CFD unless it contains appropriate risk warnings as specified in the Annex to the FSA decision.
The restrictions apply to Danish credit institutions and investment firms in connection with their offering of investments services as well to credit institutions and investment firms based in other member states which offer investment services into Denmark on a cross-border basis.