Cyprus’ financial market regulator CySEC has just today announced that it has hit iForex with a 5,000 Euro administrative fine. Following a review of the firm’s iForex.gr website between the 24th and 28th, a decision was reached by CySEC’s administrative council to issue a relatively small administrative fine of 5,000 Euros. The fine has been issued in relation to unbalanced banner advertising which was noticeably missing certain required risk disclosures. The firm has since taken measures to rectify these issues, ensuring that they comply with the obligations that come with being a regulated Cypriot Investment Firm (CIF). In order to comply with its regulatory obligations the firm has removed some content from its site which CySEC deemed to be unbalanced and has additionally added a short risk warning to advertising banners.
This is not the first time that a CySEC regulated brokerage has been fined for failing to comply with advertising requirements, with Easy-Forex having received a slightly larger 10,000 Euro fine for breaches concerning advertising materials. It is interesting to see CySEC taking action iForex, when it appears that a number of CySEC regulated firms haven’t been fulfilling their regulatory commitments when it comes to the production and distribution of advertising. It remains to be seen whether action will be taken against other Forex firms.
Advertising Requirements: As Laid out in the Markets in Financial Instruments Directive (MiFID)
The Markets in Financial Instruments Directive (MiFID) which sets out the framework for the regulation of financial instruments within the European Economic Area, requires that regulated firms comply with certain standards when advertising their products to retail investors. These advertising standards are primarily aimed at protecting retail customers and making sure that they fully understand the risks involved.
Regulated Forex brokerages are required to make sure that all advertising material discloses the risk involved with trading Forex. This means that mailers, advertising banners and any other form of media which might be deemed to constitute advertising material must have a clear risk disclosure. It appears that iForex’s fine related to the lack of such a risk warning on some of their advertising banners and web content. Firms are also required to make it clear as to who the advertising is from, with Easy-Forex’s 2010 fine relating to the both the failure to clearly state who the advertising is from and for not displaying adequate risk disclaimers.
MiFID doesn’t harmonize advertising requirements across the European Economic Area but rather sets out the minimum standards which domestic regulators are then tasked with implementing and enforcing. This means what is exactly required can vary slightly country to country, with some regulators taking a harder stance on advertising materials.