Last July, the Spanish National Securities Market Commission (CNMV) approved a Resolution on intervention measures in the marketing, distribution or sale to retail investors of financial contracts for differences (CFDs) and other leveraged instruments. This resolution prohibited the advertising of these products to retail investors, as well as certain remuneration policies and sales techniques.
Could this lead to the creation of a new investment product? This is the view of some of the participants in the 28th FundsPeople Legal Debate. Ricardo Plasencia, partner at CMS Albiñana & Suárez de Lezo, admitted that in recent months they have had several enquiries from customers on this issue. In his opinion, "the more limitations that are imposed, the less dynamic the market is", but he acknowledged that the CNMV had been inspired by the limitations that other supervisors had established in countries such as Belgium, France, Germany and the Netherlands. "Now it is likely that CFD traders will design a new product that can circumvent these restrictions and investment will go to other products, such as turbo and warrants, which do not fall into the CFD category", warned Plasencia.
For her part, Elisa Ricón, CEO of Inverco, considered that "the best way to avoid problems is not to prohibit but to focus the measures on the entities that cause problems, because if you don't, you will undermine competitiveness. However, banning a product is not the same as banning advertising relating to it, and the effectiveness of the latter measure for the protection of the retail investor is unquestionable".
Main objective: protect the investor
This is a measure that will not affect the CII sector because it places the focus on the retail investor's exposure to this type of product, and not on professionalised management, according to experts. "The CNMV's decision is geared towards reinforcing the protection of retail investors", stressed José Carlos Sánchez-Vizcaíno, Director of Depositary Supervision at Cecabank.
The advent of this limitation did not come as a surprise to the industry, as according to Joaquín Alegre, Director at Andersen, "CFDs were becoming very present in the day-to-day life of retail investors through advertising in common spaces such as football or financial broadcasters. This standardisation had led many people to invest in these products with little information".
In the same vein, Cristina Esteban, Banking and Finance lawyer at Gómez-Acebo & Pombo, recalled that "the percentage of retail customers who lose out on their investments with this type of product continues to be very high (around 75%), most do not understand the nature of the product and the risk at the time of investment, but rather are guided by the positive aspects highlighted in advertising communications such as the simplicity of the instrument, the absence of commissions or recommendations by people of public relevance. Somehow, they always claim that they were uninformed and did not know the consequences. We believe that the type of product was not appropriate", she concluded.