Obligations of Cyprus Investment Firms regarding warnings on complex financial instruments marketed to retail investors resident in Spain

The Cyprus Securities and Exchange Commission has issued a circular, number C248 dated 3 November 2017, to Cyprus Investment Firms it regulates, setting out the requirements of the Spanish regulatory authority, the Comisión Nacional del Mercado de Valores, regarding warnings on complex financial instruments marketed to retail investors resident in Spain. They apply to contracts for difference, highly-leveraged rolling-spot foreign exchange transactions and binary options.

The CNMV requires investment firms marketing such products to retail investors resident in Spain to warn them of the risk and complexity of the products, and of the costs of closing any open positions. Specified warnings regarding various risks (for example, the risk of losing more than the initial investment in the case of a leveraged product) must be included in the contract documentation, and the investor must provide a handwritten acknowledgement that the CNMV considers that such products are inappropriate for him or her.

CySEC requires firms it regulates to show any warnings on the homepage of their website, and not on a less accessible page. If the products and services are advertised on the website in the Spanish language, the warnings must also be displayed in Spanish.  The warning on the cost of closing the position may be provided by giving details of the formula used to calculate the cost, rather than specifying an absolute amount.

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