Shearman & Sterling LLP | Financial Regulatory Developments Focus | UK Conduct Regulator Reminds Firms of Obligations on Selling High-Risk Products to Retail Clients
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  • UK Conduct Regulator Reminds Firms of Obligations on Selling High-Risk Products to Retail Clients
    08/01/2018
    The U.K. Financial Conduct Authority has issued a statement on selling high-risk speculative investments to retail clients following the European Securities and Markets Authority's product intervention on contracts for difference products.

    ESMA issued decisions in March and June 2018 to temporarily prohibit the marketing, distribution or sale of binary options and to impose restrictions on the marketing, distribution or sale of CFDs to retail clients. In the CFD decision, ESMA had clarified that turbo certificates were outside the scope of the CFD restrictions. However, in its recently updated Q&A on its product intervention, ESMA acknowledges that turbo certificates have comparable features to CFDs, such as leverage.

    The FCA fully supports ESMA's approach and, like ESMA, is concerned that firms may try to circumvent the CFD restrictions by offering to retail clients products that are differently named but that possess similar features to CFDs and that may raise similar investor protection concerns. The FCA reminds firms considering marketing, selling, or distributing such products to retail clients to bear in mind their conduct of business obligations, in particular around clients' best interests, communications with clients and financial promotions, suitability and appropriateness and product governance.

    View the FCA Statement.

    View ESMA's updated product intervention Q&A.

    View details of ESMA's product intervention measures for CFDs.

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