The Federal Financial Supervisory Authority, or BaFin, stands as Germany’s financial regulator. In a statement, the watchdog had warned that CFD brokers regulated by way of other nations within the EU still don’t follow the regulations set out in Germany, in particular.

Not All Regulations Are The Same

It should be noted that the European Securities and Markets Authority, or ESMA, stands as an overarching regulator of the financial markets of the EU. Even so, ESMA holds no absolute power, and local regulators are capable of relaxing or tightening regulations within their jurisdictions at their discretion.

Last year, BaFin had imposed five restrictions on CFD brokers, and highlighted that today once more. These restrictions focused primarily on the distribution, marketing and sales of these instruments to Germany’s retail clients. However, it seems that many a broker aren’t complying with these restrictions, still operating within Germany with ease.

Cypriot Brokers Biggest Culprits

BaFin explained that these providers aim to pull in german-based clients with their offerings on CFDs. This is especially prevalent within other EU countries, but doesn’t make those specific CFD products any less illegal on German soil. The issue comes from the administration, as all these providers really need is a website based on the German language and the permission from the supervisor of their country of origin.

One of the biggest offenders, as highlighted by the German watchdog, are brokers regulated by Cyprus. Cypriot and German financial regulations are different, meaning that Cybpriot brokers do not comply with German law. BaFin remarked that the providers suffering the most in implementing prevention measures for their CFD products seem to be Cyprus-based ones.

Massive Discrepancies In Regulations

It should be noted that brokers regulated by Luxembourg, the UK, and even Germany itself in some cases, all have reports of brokers violating the local compliance mandates of BaFin. The issue, however, is that around half of all detected infringements by BaFin seems to be coming from Cypriot providers.

BaFin had conducted a survey, concluding that a whopping 48% of all CFD providers are based within Cyprus alone. A troubling fact, considering only 29% of them boast local German licensing.

The regulator highlighted that the brokers’ most common violations is refraining from the mandatory risk warnings they must show to traders. Of all the infringements the German watchdog recorded, a full 70% of them fall under this category. Another key thing these brokers violate is the leverage limitations and bonus restrictions the German regulator had set out.