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September 19, 2018

IOSCO issued a final report providing measures for securities regulators to consider when addressing the risks arising from the marketing and sale of OTC leveraged products to retail investors. The report contains three complementary toolkits that cover the marketing and sale of rolling-spot forex contracts, contracts for differences (CFDs) and binary options. IOSCO also issued a public statement on the risks of binary options and the response of regulators for mitigating the risks and harm to retail investors transacting in these products.

The report on retail OTC leveraged products contains measures aimed at increasing the protection of retail investors who are offered OTC leveraged products, often on a cross-border basis. The toolkits set out guidance for regulators on:

  • Policy measures that can help to address the risks arising from the marketing and sale of OTC leveraged products by intermediaries
  • Educating investors about the risks of OTC leveraged products and the firms offering them
  • Enforcement approaches and practices to mitigate the risks posed by unlicensed firms offering the products

The measures in the three toolkits draw largely on IOSCO members’ experiences and practices. The toolkits described in this report do not mandate regulatory action. The initiatives are intended to serve as useful guidance to IOSCO members as they consider their approaches to address the risks arising from the marketing and sale of OTC leveraged products to retail investors. IOSCO members are encouraged to consider adopting one or several of these measures, in accordance with their legal and regulatory framework and the specific risks they have identified, to help ensure an appropriately high level of protection for retail investors transacting in the relevant products. Therefore, implementation of the different measures may vary across IOSCO members.

 

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Keywords: International, Securities, OTC Leveraged Products, Customer Protection, IOSCO

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