With the UK leaving the EU, new financial regulations in the UK and their implementation and enforcement guidelines change daily. As part of these changes, companies that market, distribute or sell crypto assets and crypto CFDs to retail customers in or from the UK would have had to cease these activities by January 6, 2021.
The latest directive, named FCA PS20 / 10, is new territory that has not yet been fully uncovered and it is difficult to predict how the new directive will be approached and practically enforced. Many brokers and affiliated companies in the financial sector are already reassessing their next steps in business and are looking for legal and banking solutions for the new situation.
As the interest continues to grow, Finance Magnates found time to speak to international legal and banking professionals Tal Itzhak Ron and Emily Helmer of Tal Ron, Drihem & amp; Co., law firm, to shed some light on the unknown and share some tips.
Q: Tal, Emily, who does the FCA PS20 / 10 Directive apply to?
A: The FCA PS20 / 10 directive is particularly relevant for:
However, you may find that this is not an exhaustive list and the policy may apply to other parties and service providers.
Q: Tal, let’s say I am an affiliate practitioner bringing traffic to FX brokers through a cost-per-acquisition (CPA) model. Does that apply to me?
A: This is the main question we have discussed with many of our connected customers since the regulation was even proposed. They were particularly concerned about how the authorities define, « A company that markets products that reference crypto assets. » Does this only apply to the actual campaign owners themselves (the brokers)? Or does this also apply to the companies that actually publish the crypto assets for sale and distribution (this can be the partner who either works directly with the broker or through a partner network)?
Our company is closely monitoring the situation and is already taking action with many of our clients – brokers, affiliates, and technology providers – to update their terms and conditions to cover these options.
Q: Emily, what do we know for sure?
A: In the UK, the marketing and distribution of financial instruments and the provision of related services are governed by the UK funding regime.
The addition of crypto assets to the list of financial instruments covered by the funding regime will affect the ability of service providers to distribute crypto assets and market related services in the UK.
As before, all marketers (whether in the UK or for customers in the UK) are still subject to the CAP code – the UK code for non-broadcast advertising and Direct & amp; Advertising marketing.
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We discussed two chapters of the code with our customers that are specifically relevant to the new guidelines after Brexit.
Chapter 1: Compliance specifies that the marketer must not state or otherwise imply that a product can be legally sold if it is not possible, as required by law. In light of the new policy, crypto assets and CFDs cannot legally be sold to UK residents.
Chapter 14: Financial Products states that marketers of these products (although the classification itself is ambiguous) when promoting financial products are subject to FCA guidelines.
Q: So Emily and Tal, what options do I have now in marketing crypto assets and CFDs?
A: While the marketing of unregulated crypto assets to UK investors is restricted due to “controlled investments” and “controlled activities”, some customers have successfully obtained exemptions for marketing materials.
As part of the Financial Promotion Order 2005 (FPO) there is, among other things, the option of having marketing material approved by an FCA authorized body before it is sold.
Brokers, platforms and affiliates are working closely with our team to modify their insert orders and terms and conditions to adequately protect themselves by adding full compliance disclaimers and indemnity clauses to ensure they are unilateral, yet protected transparent and in accordance with the applicable rules. Compliance is not only a challenge, but also an opportunity for maintaining a successful financial business. There are so many successful companies that can be a good example.
Q: Tal, as a courtesy to our readers, without considering it legal advice – can you give an example of an update of such a legal arrangement?
A: Sure. One clause we added to the terms and conditions of one of the leading affiliate networks in the field read as follows:
“The customer (the broker) acknowledges that the company (the network) is acting solely as an intermediary. Therefore, the company is in no way responsible for confirming, monitoring, or approving compliance by the customer or any third party (the partner) with all applicable laws and regulations. The company is not a party to the transaction and / or the interaction between the customer and the third party service providers carried out by the customer and their customers. This is the sole responsibility of the customer. «
Similarly, brokers had changes to their agreements – both with partners and with traders – in which we expanded many of the clauses that deal with responsibility and compensation.
Thank you, Tal Itzhak Ron and Emily Helmer of Tal Ron, Drihem & amp; Co., law firm for the expert insights and I look forward to meeting you again soon.