AFM consultation on restriction on sale of turbos to retail investors

The Dutch Authority for the Financial Markets (AFM) is holding consultations on measures to restrict the marketing, distribution or sale of 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.

In brief

• The AFM is consulting on measures to provide better protection for investors with respect to turbos
• Turbos are instruments that are similar to the equally risky CFDs, which are already subject to restrictions
• Solutions from the market at the urging of the AFM
• Responses can be sent until 24 January 2021

Turbos similar to CFDs, which are already subject to restrictions

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 the five 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.

Call for solutions to limit the risks of turbos

Earlier this year, the AFM 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.

Respond to the consultation

You can respond to the consultation to [email protected] until 24 January 2021. Please indicate whether the AFM may disclose the response publicly or anonymously. The AFM will take your contributions into account in its final decision on the measures.

Journalists may contact Yolanda Bieckmann, AFM spokesperson, on +31 (0)6 31 777 686 or [email protected].