[Newsflash n. 75]

AFM (the Dutch financial authority) has taken product intervention measures in accordance with Article 42 of MIFIR (Regulation (EU) No 600/2014) and notified all other NCAs and ESMA of the details of its proposed measure. On 7 June 2021 ESMA issued its Opinion ESMA35-43-2524, concluding that the proposed measures are justified and proportionate. Furthermore, ESMA’s opinion encourages all National Competent Authorities (NCAs) to monitor turbos in their respective markets to assess whether similar risks for retail investors as those identified by the AFM could arise there.

The AFM measures consist of a permanent restriction of the marketing, distribution or sale of turbos to retail clients in the Netherlands. In particular, they would introduce (i) a leverage cap, (ii) a prohibition to provide retail clients with a payment or other prohibited benefits in relation to the marketing, distribution or sale of a turbo, and (iii) the requirement of a risk warning.

Turbos addressed by the measures are high-risk leveraged debt instruments that have a stop-loss feature and whose value is derived from the value of an underlying asset and the financing of the value of the underlying asset. Through this kind of financial instruments investors speculate that the prices of the underlying asset, such as a share, an index or a currency, will rise or fall. Such products entail high risks for retail investors and are object of marketing and sales practices that do not adequately take into account the associated risks.

For any further clarification and/or for assistance on the topic of this Newsflash, please contact your reference contact in Legália.

Contacts:

Vito Vittore
Partner

Elena Pagnoni
Partner