knowledge | 18 July 2019 |

CFD Providers: ESMA is Watching You!

In recent years, both ESMA and national competent authorities have imposed restrictions on the marketing, distribution or sale of contracts for difference (“CFDs”) to retail clients. ESMA has now issued a statement highlighting its concerns regarding non-compliance with these restrictions.


ESMA temporarily restricted the marketing, distribution or sale of CFDs to retail clients by Decision 2018/96 in accordance with the product intervention measures set out in Article 40 of the Markets in Financial Instruments Regulation 600/2014 (“MiFIR”). ESMA subsequently amended and renewed this restriction on three occasions.

A number of national competent authorities (“NCAs”), including the Central Bank of Ireland (“CBI”) have also used their own product intervention measures under Article 42 of MiFIR to impose permanent restrictions on the marketing, distribution or sale of CFDs to retail clients. See our related briefing here.

Overview of ESMA’s Statement

On 11 July 2019, ESMA issued a public statement on the application of product intervention measures under Article 40 and 42 of MiFIR by CFD providers (the “Statement”) (here), expressing serious concerns regarding CFD providers’ non-compliance with legal requirements applicable to the provision of CFD-related services to retail clients. The Statement focuses on two specific issues:

  • the treatment of retail clients as professional clients on request; and
  • the marketing, distribution or sale of CFDs to retail clients by third country CFD providers.

Professional Clients on Request

The product intervention measures imposed by ESMA and the NCAs on the marketing, distribution or sale of CFDs apply to retail clients. ESMA has identified an increase in the number of clients treated as professional clients on request by CFD providers and that some CFD providers are advertising the option of such treatment to retail clients.

In the Statement, ESMA reminds CFD providers that they must:

  • strictly refrain from implementing any form of practice that incentivises, induces or pressures an investor to be treated as a professional client and, in doing so, provides (non-exhaustive) examples of promotional language that would be considered to constitute such an incentive;
  • only treat a retail client as a professional client if an adequate assessment of the client’s expertise, experience and knowledge gives reasonable assurance, in the light of the nature of the transactions or services envisaged, that the client is capable of making investment decisions and understanding the risks involved.

Marketing, Distribution or Sale by Third-Country CFD-Providers

In the absence of authorisation or registration in the EU in accordance with MiFIR or with the national third-country regimes in force in the various EU Member States, a third country firm may only provide investment services to EU clients at the clients’ own exclusive initiative. However, where a third-country firm solicits clients or potential clients in the EU or promotes or advertises investment services or activities together with ancillary services in the EU, it will not be deemed to be providing a service at the client’s own exclusive initiative

Acccording to ESMA, some third-country firms are marketing CFDs that do not comply with ESMA’s measures to retail clients in the EU, particularly through on-line advertising.

Moreover, ESMA has observed that some EU CFD providers are marketing to retail clients the option to move their accounts to an intra-group third-country entity, noting in the Statement that this may constitute:

  • a circumvention of ESMA’s product intervention measures by the EU authorised firm; or
  • a solicitation of retail clients or potential clients, promotion or advertising of investment services in the EU by the third-country entity,

and providing examples of such marketing practices. ESMA also suggests that use by a corporate group of a common webpage to provide information on the activities of both EU and non-EU group entities may result in such a circumvention or solicitation, identifying features that might have that effect and one that might assist in avoiding it.


The Statement reminds CFD providers that they must comply with all applicable legislative requirements and with relevant product intervention decisions (whether adopted by ESMA and/or the NCAs), taking into consideration clarifications provided in relevant ESMA Q&As and the content of the Statement.  It also warns CFD providers that ESMA has identified instances of non-compliant activity.  EU and non-EU CFD providers should take this opportunity to review their activities by reference to the Statement to ensure that, if ESMA is watching, they will not be found wanting. 


This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.

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