Germany: Cyprus brokers are responsible for 50% of the irregularities

The German Federal Financial Supervisory Authority (BaFin) took a close look at the area operating in these areas Forex brokers, mainly from abroad. Companies from Great Britain, the Netherlands, Ireland, Malta and Cyprus were checked and their activities compared with companies with German origin. A total of 40 brokers were rated. It turned out that most Cyprus brokers have a lot behind their ears. 

The German financial supervisor has already published the official results of this investigation on its website. The processed data comes from the inspections that took place in August 2020. It turned out that violations of the regulations were detected in every second broker CFDs. Most of them incorrectly informed their clients about the risk related to this market. 

Even fewer companies - only 32% - met all statutory guidelines and there were no comments to them. Interestingly, the worst in terms of compliance with the regulations are companies from Cyprus, of which there are about half, 12% are based in Great Britain, and 29% are German companies operating on the domestic market. The main problems are with properly informing about the risk, but there are also those that do not even mention that trading on the CFD market involves any risk.

BaFin: Cyprus is the problem

German Federal Financial Supervisory Authority (BaFin) explicitly states in the report that it is not imprecise regulations that are the problem, but a frivolous approach to them by Cypriot companies. Half of them not only violate the regulations, but do little of the warnings, so in the near future we can expect high financial penalties, which - as usual - will be paid after court appeals, and brokers will continue to do "their" thing. 

However, not only Cyprus brokers are on censorship. Irregularities were also found in companies from the Netherlands, Malta, Luxembourg, Ireland, Great Britain, and ... Germany. The fact remains, however, that half of the infringements found are the fault of the Cypriot companies.

Brokers have faced penalties not only because of not informing or inadequately communicating about the risks involved in trading Forex. BaFin also found irregularities in the level of leverage (13% of breaches), as well as an illegal bonus policy. 8% of companies use them to encourage them to start CFD investments, which is illegal in Germany and many other countries (including Poland).  

What penalties for dishonest brokers?

What's next? In relation to companies registered in other countries, the German Federal Financial Supervisory Authority cannot act as freely as in the case of companies with their headquarters in Germany. No decision on them can be immediate, nor can it be subject to an immediate enforceability clause. Companies operating in Germany are still foreign entities that offer their services in this country (and often also in many others) on the basis of a European CFD passport. However, they will not go unpunished. 

BaFin has announced that it will forward each case regarding detected irregularities to the appropriate supervisory authority in the country where the companies are based. In the case of, for example, Great Britain, it may turn out that the punished company will not do well, because the penalty may be much more severe than that imposed by the German regulator. It will be worse with companies registered in Cyprus, where the regulations are sometimes applied very strictly, and sometimes - to put it very mildly - it can be different.