FCA: firms still restricted on complex product retail sales post-Brexit

Last week the European Securities and Markets Authority (ESMA) renewed its prohibition of the marketing, distribution or sale of binary options to retail clients for a further three months. The prohibition was originally put in place in July 2018 and has now been extended three times.

The FCA said ESMA's temporary intervention measures, which also restricted the sale of contract for difference (CFD) products to retail clients, would become part of UK domestic law on exit day as part of the EU (Withdrawal) Act.

It said firms were therefore required to comply with ESMA's decision notices until they expire on 1 April 2019 for binary options, and 30 April 2019 for CFDs.

The FCA said it was currently considering feedback on two consultation documents which proposed making ESMA's temporary product intervention measures permanent in the UK. The FCA proposals are the same as ESMA's, but it is suggesting also applying the rules to closely substitutable products.

These would include options with similar pay-out structures and risk features to CFDs, while the binary option ban could also include certain 'securitised' binary options.

The regulator said it planned to make its final decisions soon, in order to be able to publish a policy statement in March 2019 on restrictions on binary options, and a statement in April 2019 for CFDs and 'CFD-like' options. It added that the final rules would apply with the dates that ESMA’s restrictions expire.

"If, for any reason, we are unable to finalise our domestic approach prior to ESMA's existing interventions ceasing to have effect in the UK, we will consider adopting temporary product intervention measures to replicate ESMA's," the FCA said.

"This will ensure no loss of protections for UK consumers in a period between ESMA's existing interventions ceasing to have effect in the UK, and finalising our domestic approach," the regulator said.