ESMA Temporary Product Intervention Measures on the marketing, distribution or sale of CFDs

ESMA has updated its Q&As in this area and has included a new section relating to the prominence of risk warnings.

Guidance given by ESMA states that “The risk warning shall be in a layout ensuring its prominence, in a font size at least equal to the predominant font size and in the same language as that used in the communication or published information”.

The ESMA guidance continues by reminding firms that information addressed to, or disseminated in such a way that it is likely to be received by a retail client must give a fair and prominent indication of any relevant risks when referencing any potential benefits of an investment service or financial instrument.

In the context of internet-based marketing, giving prominence to the risk warning implies that it is displayed on the relevant webpages in a way that would signal that the message is of importance and makes it unlikely that a client or a prospective client would not notice it. It should attract attention, for instance, by virtue of its size or position on the webpage.

In deciding whether a particular risk warning is ‘prominent’, firms should consider the target audience, the characteristics of CFDs and the likely information needs of the average recipient of the communication.

ESMA provides guidance as to examples of good practice that will indicate firms have given sufficient prominence to a risk warning. These include:

▪ Warnings are shown using easily readable font styles (at least in the predominant font size of the respective communication with letters displayed in a discernible font colour) across a neutral background.

▪ The size of the warning occupies a noticeable portion of the text displayed, taking into account the content, size and orientation of the communication as a whole.

▪ Warnings are contained within their own distinct border, drawing the reader’s attention to them.

▪ In the context of web pages, warnings remain fixed on the screen even when the customer scrolls up and down respective web page.

▪ Warnings are repeated on linked pages further into the website product chain.

▪ In other communications than web pages, warnings are clearly stated within the main body of the communication.

Firms offering CFDs should review their marketing materials to ensure risk warnings are given sufficient prominence.