Dutch regulator plans to restrict sale of turbos to retail investors
The Dutch Authority for the Financial Markets (AFM) has launched a consultation on measures to restrict the marketing, distribution or sale of turbos.
Turbos are high-risk leveraged products. Investors speculate that the prices of an underlying, such as a share, an index or a currency, will rise or fall. Turbos are very similar to contracts for difference (CFDs).
The sale of CFDs is already subject to restrictions that decrease the risks for retail investors. The restrictions proposed by the AFM for turbos are similar to those applying to the sale of CFDs. This concerns three of the five restrictions: a leverage limitation, a mandatory risk warning and a prohibition on incentives offered to trade in turbos.
The AFM considers that retail investors are currently not adequately protected against the risks of turbos. Previous research has shown that on average, investors suffer a loss of €2,680 with these risky investments.
Earlier this year, the regulator called on the turbo industry to share solutions that would decrease the risks of turbos. Several companies and individuals responded to this with a range of proposals. These varied from ‘do nothing’ to an outright ban on turbos. There were also proposals to restrict the sale of turbos, to be imposed by the AFM or the market itself.
Responses to the consultation should be sent to reactieturbo@afm.nl until January 24, 2021. Please indicate whether the AFM may disclose the response publicly or anonymously.