Over the past few years, trading sites have undergone a facelift, attracting more and more retail investors. Most rely on practical guides and online training to attract novice investors. But as the number of investors reporting having been contacted by a trading site of foreign origin increases, the AMF (Autorité des Marchés Financiers) has recently published a series of recommendations and warnings against unauthorized sites.
The stock market is once again attracting retail investors
Faced with the health crisis, some private investors are turning to the stock market to make the most of their free time. According to AMF data, in 2020, almost 400,000 French people placed a stock market order for the first time, or decided to reactivate their account after months of dormancy. This renewed interest in the financial markets has been accompanied by a rejuvenation of the trading community. Indeed, since the start of the pandemic, several brokers have noted the arrival of new, hyper-connected investors, most of whom are under 35.
To build customer loyalty and help them progress, brokers are not hesitating to offer practical guides and online training. In the United States, Robinhood, valued at $11.2 billion, has made its mark by adopting the strategies of Silicon Valley groups. The online broker allows you to carry out a stock market transaction in just a few clicks, without paying a single commission. However, in view of the advantages put forward by certain players, the AMF is calling for caution.
Investing with a foreign-based broker: checks are essential
To offer investment services, the French regulator reminds us that all companies must be registered as "investment services providers" or ISPs, and listed in the Regafi register of financial agents. However, this is far from being the case for the new intermediaries, who often operate under the freedom to provide services in France. For example, some of them have not obtained AMF approval, but rather that of their home country regulator, Cysec in Cyprus or BaFin in Germany.
The European passport is a mechanism enabling brokers to act under the freedom to provide services, i.e. without having a branch in the Member State concerned, or to act via a branch. Note, however, that if the company acts under the freedom to provide services and not via a branch, the investor will have to turn to the regulatory authority of his country of establishment in the event of a dispute. In other words, his case will not be eligible for AMF mediation.
A study published in March 2021 analyzing more than 200 reports and complaints from French savers between 2019 and 2020 highlights the irregular practices of establishments operating in France via the European passport. Of the total number of reports issued, 141 concerned players based in Cyprus. Aggressive commercial practices, problems with account closure or order execution, illegal provision of advice, high fees... The AMF calls for caution and verification, and recommends that investors consult its warnings and blacklists of unauthorized trading companies and sites.