Exclusive: FX brokers sending ‘non-marketing’ emails promoting offshore entities

ESMA - Did they go too far?

LeapRate Exclusive… LeapRate has learned that a number of EU based Retail FX and CFD brokers have been sending out emails to their clients and IBs/Affiliates, reminding them that they cannot formally market out-of-EU accounts to clients. But, reminding them that the clients may themselves, of their own initiative, seek out foreign brokers and open accounts there.

The emails basically amount to “non-marketing” emails – we can’t market this to you, but you should know that you can do this on your own.

The “non-marketing” initiative comes as ESMA’s rules limiting leverage which clients can use at EU brokers kicked in on August 1, and by our understanding have taken a major bite out of trading volumes at a number of brokers. And, have also left a lot of clients frustrated.

By EU MiFID rules, EU domiciled clients are indeed allowed to open accounts at “offshore” FX brokers. However, those brokers are not allowed to market to EU clients. Similarly, brokers with EU licensed entities can indeed accept EU clients at their non-EU and offshore entities – and offer them more lenient terms (read: higher leverage) than in the EU. They just cannot market their offshore entities to EU based clients.

The emails of course leave out links or other direct promotion leading to the entities / websites of the brokers’ offshore entities, but give instruction how retail traders can find these sites ‘on their own’.

In the wake of the new restrictive conditions placed on EU-licensed brokers, we understand that already a number of brokers licensed and operating in other jurisdictions have seen a noticeable bump in new client signups and trading volumes over the past six weeks. In particular, a number of Australia based, ASIC regulated brokers have had a surge of activity in the past few weeks – being viewed by astute traders as a properly-regulated, safe jurisdiction similar to EU countries, but still able to offer higher levels of leverage.

Regarding the ‘non-marketing’ emails, the following is one such example, which was sent to the IBs and affiliates of one EU based Retail FX broker which also has licensed subsidiaries in other jurisdictions.

Dear Partner,

******** has recently received many requests from both EU clients & partners asking whether EU clients can register and trade with other entities in the ******** group – to avail of different trading conditions.

******** is licensed in multiple jurisdictions around the world – EU, Japan, Australia, South Africa & BVI.

Under MiFID II, it is permissible for clients within the EU to register for accounts with brokers outside of the EU. Clients, therefore, do have the choice to trade with non-ESMA affected trading conditions.

However, non-EU-brokers are not permitted to market to EU clients.

Therefore, ******** CANNOT market the availability of an account with ******** Ltd (BVI) nor can we induce clients to trade with our Non-EU Company. Clients must contact ******** Ltd (BVI) at their OWN EXCLUSIVE INITIATIVE.

Should any client wish to learn about ********’s other licenses – they may review our global regulations at https://www.********.com/about-********/compare-regulation

If an EU client does indeed register (at their OWN EXCLUSIVE INITIATIVE) with another entity of the ******** Group – it is important to remember the following:

  • Negative balance protection does not apply.
  • The client is not eligible for the Investor Compensation Fund (ICCL).
  • The account is not regulated by [EU Regulator]. It is regulated by the British Virgin Islands regulatory authority (BVIFSC).
  • The Financial Services and Pensions Ombudsman (FSPO) is not the correct authority to make any complaints to. Complaints should go to the BVIFSC.

The client will be required to sign a disclaimer confirming and agreeing to waive these rights.



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