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MFSA risk warning against trading Binary Options, CFDs, and Forex
03/03/2017
MFSA risk warning against trading Binary Options, CFDs, and Forex

The Malta’s financial regulator MFSA risk warning against trading Binary Options, CFDs, and Forex. What prompted MFSA to issue this warning?

3 March, AtoZForex  Malta’s Financial Services Authority (MFSA) issues a warning notice regarding risks associated with speculative products and other products associated with them. The list of such products includes binary options, contracts for difference (CFDs), and Forex. MFSA is not the only regulator to issue a warning against such highly speculative instruments. Previously, Cypriot regulator CySEC and Italy’s CONSOB have issued similar warnings last month.

What prompted MFSA risk warning against trading Binary Options?

Since no specific scam or broker was mentioned, surprisingly it is uncertain what led MFSA risk warning against trading Binary Options, CFDs, and Forex. In the past, the Malta regulator has been fairly active in issuing warnings against specific scams or brokers.

These financial instruments have been worrisome for safeguarding the investors according to the European Securities and Markets Authority (ESMA). The luring marketing strategies of the companies that sell these products raise the concern. Even the way these products are presented to the investors, who might not understand the associated risks and complex nature, is of great concern.

Frequent lucrative advertisement of such products without any investment advice on various electronic platforms results in detriment and substantial loss to the retail investors. Moreover, unauthorized and unregulated entities offer these speculative products, which is also bothersome. This leads to substantial increase in the risk for investors who ultimately become victims of fraudulent scams. The MFSA notice can be seen below:

Ban on highly speculative instruments in EU

Malta’s regulatory entity is following the footsteps of other EU countries that are struggling against the speculative and risky financial instruments. In addition, Belgium has banned the over-the-counter distribution of such products. Moreover, advertising of such instruments in not permissible in France, Germany, and Netherlands. Even Israel Securities Authority (ISA) has made trading of such products illegal in its country. As discussed earlier, CySEC and CONSOB are also in line.

MFSA recommends the investors to be extra careful and vigilant whenever they look forward to risky and complex forms of financial investment. If they have any doubt, they should also seek the advice of professional investors. Furthermore, they should make sure that they completely understand the risks involved. They are advised to do so before investing in such highly speculative, risky, and complex financial instruments.

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