CySEC issues affiliate new broker-affiliate guidelines

27 June 2017

The Cyprus Securities and Exchange Commission (CySEC) has published a new circular aimed at making CySEC-licensed financial trading operators increase the level of monitoring and supervision they exercise over the affiliates they work with. 

The directive’s objective is to strengthen the working practices of binary and CFD brokers and how their products are marketed to the public.  

CySEC licences and regulates a large number of brokers and as part of the new guidelines, these brokers/operators (Cyprus investment firms, ‘CIFs’) will be required to: 

  • “exercise due skill, care and diligence when entering into, managing or terminating any arrangement with an affiliate”,
  • “ensure that the affiliate has obtained any authorisation required or is registered in his jurisdiction to perform such activity, if required”,  
  • “ensure that the content of the marketing material is clear, fair and not misleading (…) and that the material either is prepared by the CIF itself and disseminated to Affiliates, or is subject to pre- approval and ongoing monitoring by the CIF, if a third party is engaging to do this”,

If an affiliate acts outside the scope of the agreement, CySEC said “the CIF should cease the cooperation and take appropriate measures against the affiliate, informing, at the same time, its clientele through its website, for this termination”.

The broker should also inform CySEC of the incident and provide it with the affiliate’s website details and identity.

The Cyprus financial watchdog will publish “a warning list with the website addresses of the affiliates that are operating outside the parameters provided by the Law, CySEC’s circulars and acceptable business practices, enabling all CIFs to be informed of such malpractice and to cease/avoid any cooperation with them. Details of the affiliates’ representatives (physical persons) will also be included in the warning list”.

The binary options and financial trading sector has been subject to much scrutiny over recent years, with some markets either banning the advertising of binary option products , restricting their scope or outright forbidding them.

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