On 1 June 2018, the European Insurance and Occupational Pensions Authority (EIOPA) published a statement (EIOPA-18/251) on consumer detriment resulting from policyholder exposure to contracts for differences (CFD) and binary options.

The European Securities and Markets Authority (ESMA) has adopted temporary product intervention measures on the provision of CFDs and binary options to retail investors in the EU. Specifically, these measures include a prohibition on the marketing, distribution or sale of binary options and several restrictions on the marketing, distribution or sale of CFDs to retail investors.

ESMA has concluded that some of the features of these products raise significant investor protection concerns, making them inappropriate for the large majority of retail investors.

Given the potential future risks to policyholders, EIOPA expects insurance undertakings to avoid, as far as possible, direct underlyings of insurance-based investment products, instruments for which ESMA has issued a ban or restriction for the purposes of distribution to retail clients.

Within its remit, EIOPA will use the available powers and measures to ensure the integrity, transparency, efficiency, and orderly functioning of financial markets and to ensure that customers’ interests are adequately protected throughout the European Union.

Specifically, EIOPA and National Competent Authorities will continue to monitor the direct market for insurance-based investment products, including those providing direct exposure to complex and risky underlyings, in view of whether other restrictions or bans should be necessary.

View: EIOPA publish statement warning against the use of instruments banned or restricted by ESMA