Unlike in solvency supervision, which includes a consumer protection remit indirectly, in BaFin’s consumer protection activities the focus is directly on clients and investors. By adopting the Retail Investor Protection Act (Kleinanlegerschutzgesetz), legislators have handed a new tool to BaFin which gives it the right to prohibit products or restrict their distribution.

Restrictions on the distribution of CFDs

In May, for example, BaFin restricted the marketing, distribution and sale of contracts for difference (CFDs). The sale to retail investors of contracts entailing an additional payments obligation has been prohibited since 10 August 2017. "This is the first time we have used the option of product intervention, and represents major progress on one of the most pressing issues in consumer protection", explained Elisabeth Roegele, Chief Executive Director of Securities Supervision/Asset Management.

People investing in CFDs with an additional payments obligation could lose not only their invested capital, but even some of their other assets or, depending on the leverage effect, everything they own. "A risk we cannot accept as a consumer protection organisation", commented Roegele.

Warning about initial coin offerings

BaFin also provides consumers with information, or issues explicit warnings to them, about risks in the financial market. For example, in November 2017, it issued a warning about the various risks associated with initial coin offerings (ICOs), a highly speculative, but evidently popular form of corporate and project financing. Among other things, BaFin made investors aware that they could lose all their invested capital if they bought coins or tokens in an ICO. BaFin uses the powerful tool of product intervention only as a last resort and after careful consideration.