The Financial Supervisory Authority of Norway is planning to propose restrictions on CFD offerings to retail consumers and a complete ban on offers of binary options to retail investors.
The financial regulator has published a consultation paper that outlines the proposed changes to the country’s laws, which are intended to improve investor protection from risky investment products.
Norway plans to implement regulations that resemble ESMA’s position in its recent consultation.
Under the proposed regulations, the marketing, sales and distribution of binary options to non-professional customers would be illegal in Norway.
The regulator stated that it had previously investigated foreign binary options providers that were not properly licensed and used aggressive marketing tactics to draw in customers without providing appropriate risk warnings.
The regulations would also impose restrictions on the offering of CFDs. Leverage restrictions as well as account protection, disclaimers and stop-loss on positions have all been outlined by the regulator.
Four CFD providers have lost their licenses in Norway due to deceptive marketing, inadequate assessments of the suitability of investment and insufficient risk information.
After assessing the trading results of customers, the regulator found that 82% of 1,000 customers trading CFDs lost money over a period of one to two years.
Norway isn’t the only country targeting binary options and CFDs.
Merel van Vroonhoven, Chairman of the Dutch Authority for the Financial Markets Board, said in a speech at the FinTech and Digital Innovation conference, “Regarding binary options and highly leveraged CFDs, my view is clear. These products should be removed from the market as quickly as possible.”
She said more measures need to be taken to protect retail investors who are considering investing in CFDs and binary options.
The European Securities and Markets Authority (ESMA) is proposing new leverage limits for CFDs, ranging from 30:1 to 5:1. The regulator is considering a ban on the marketing, distribution and sale of binary options to retail clients.
In Sweden, binary options fraud is a top concern among its regulator Finansinpektionen, or FI. In 2017, the regulator warned of 1,129 non-compliant companies that were operating in Sweden without permission.
The United Kingdom is also targeting binary options firms. The Insolvency Service shut down Metro Options Limited. The firm’s website displayed a number of unfounded claims, such as promises of £400 profits on every £500 traded. The company also claimed that it would match customer deposits and that it offered a bonus scheme.
Metro lied about having over 600 retail clients and that it was awaiting license renewal with the Cyprus Securities and Exchange Commission. It also claimed to have a trading presence in Canary Wharf in London, but never had any registered office in that location.
Customers who contacted the police claimed that they were unable to obtain investment returns or refunds of deposits. They also alleged that the company had stopped communicating with them after requesting refunds or investment returns. The parties claimed to have losses of £350,000.
The future of binary options trading and CFDs is still unclear, as more countries take action against these riskier investment products.