Wed. Apr 1st, 2020

The CNMV proposes to restrict the advertising of complex financial products



The National Securities Market Commission (CNMV) considers it necessary to restrict the advertising of entities that offer complex financial products, not indicated for retail investors, including those derived from sponsorship agreements with football clubs.

Six LaLiga Santander teams (Real Madrid, Atlético, Valencia, Sevilla, Getafe and Betis) have sponsors that sell complex financial products, and two of them – Atlético de Madrid and Betis – carry advertising on their kits.

According to an article prepared by the General Directorate of Strategic Policy and International Affairs of the CNMV, restrictions on advertising, both direct and indirect, of such entities through “sponsorship formulas or collaboration with football clubs” would be justified. , since “by definition they represent an advertising channel directed indiscriminately to the general public, including the youth.”

The establishment of these restrictions – the article adds – “requires determining the type of provision that should be approved and, in particular, deciding whether a rule with the rank of law is required”.

In addition, according to the CNMV, “it would be necessary to establish a transitional regime for existing contracts.”

The supervisor suggests sending a letter to the Professional Football League to remind him of the current restrictions on the commercialization of complex products – such as contracts for differences (CFD) or binary options (OB) – and convey his concern about “the use of clubs as an advertising channel “.

The CNMV plans to include this issue in its 2020 Activity Plan as one of its specific objectives.

According to the CNMV article, Atlético de Madrid (Plus500), Betis (Easy Markets), Valencia and Getafe (both Libertex), Real Madrid (Exness) and Sevilla (Ever FX) have sponsors that market complex products.

In the cases of Atlético de Madrid and Betis, the sponsorship agreements include advertising on the shirts.

According to the CNMV, CFDs and OBs are especially complex financial instruments, characterized by high risk and high short-term volatility.

In addition, CFDs usually incorporate leverage, which implies that investors may incur losses greater than the amount initially disbursed.

In the opinion of the stock market supervisor, these products are not suitable for retail customers because of their difficulty in understanding and their risks.

In May 2018, ESMA, the European supervisor, banned the commercialization of OB to retail investors and restricted the sale of CFDs. The CNMV made decisions on the same line in June 2019.

Despite this, the CNMV observes that there is “abundant brand advertising or generically referred to entities that offer this type of product”.

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