The European Securities and Markets Authority (ESMA) warns investors against parties without the required licence that offer private individuals the opportunity to invest in Contracts for difference (cfd), FX forwards and other currency derivatives.
The risks attached to cfd's and other currency derivatives are hard to estimate for private investors. It is certain, however, that in a worst case scenario losses may prove higher than the money paid in. Moreover, this concerns investments in markets that are very volatile and which were consequently originally intended for professional investors.
ESMA warns explicitly not to install any software that is offered on the digital platforms of providers of complex currency movements. This could mean that investors could lose control of the transactions performed by them. The supervisor also calls for caution when using credit cards on such sites.
This is the first time that ESMA warns investors explicitly against investment practices. The warnings follow the observation of supervisors that ever more providers of these products approach investors, mainly via the internet. A small part of those providers does not even have the right papers to be allowed to offer speculative currency derivatives.
The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.
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