Germany’s financial regulator Bundesanstalt Für Finanzdienstleistungsaufsicht (Bafin) has announced that it plans to limit marketing, distributing and selling Turbo certificates to retail investors based in Germany. The Regulatory Authority stated that it will issue a general administrative mandate for this purpose, which is now advising market participants.
Product intervention is based on BAFIN market research. In the light of the findings, the Supervisory Authority has significant concerns about investor protection.
Turbos – also known as Speeders or Sprinters – are structured structured products, most popular with retail traders in some EU areas (mainly in the Netherlands and Germany). The Turbos are exchanged negotiated by leverage leverage that provide indirect (long or short) exploitation of the exposure to an underlying asset (such as the Company’s shares or shares), with the potential loss being limited to the amount paid to them.
Bafin’s counterpart in the Netherlands, the Dutch Authority for Financial Markets (AFM), gave similar restrictions on Turbos in 2021.
In the future, marketing, distribution and sale of turbo certificates to retail investors based in Germany will only be possible under certain conditions. According to BAFIN’s scheduled measure, recipients – intermediaries, publishers and providers – must comply with the following regulations:
- Recipients must provide standardized risk warning. This must state that seven in ten retail investors suffer from losses in negotiating Turbo certificates. Risk warning must be included in every communication on marketing, distribution and sale of Turbo certificates.
- Recipients may not offer any bonuses that encourage retail investors for Turbos trade. This applies to both monetary and non -monetary benefits. For example, order fees may not be reduced or resigned for turbo certificates and there may be no new customer bonuses. Non -financial benefits, such as preferential customer service or gifts are also prohibited.
- Recipients must complete an extensive fitness assessment for turbo certificates. A test is designed to carry the basic features of the product. Retail investors must be able to answer at least six questions about negotiating on turbo certificates before they are allowed to buy them. The test must be repeated every six months.
TURBO Certificates: Significant concerns for investor protection
Based on comprehensive market survey on the Turbo Certificate, BAFIN has identified significant concerns about investor protection. The majority of retail investors (74.2%) suffered damage while negotiating turbo certificates. On average, they lost € 6,358 each. Their Total losses over a five -year period amounted to over 3.4 billion euros. In addition to the high investor losses, BAFIN is based on its concerns about the high complexity of turbo certificates and marketing and distribution practices associated with these products.
Bafin may limit or ban marketing, distributing and selling financial instruments if there are significant concerns about investor protection. This is governed by Article 42 of the European Markets in the Rules of Financial (MIFIR) and Article 15 (1), proposal 2 of the German Law on Milk Values (Wertpapierhandelsgesetz) in conjunction with Article 42 of Mifir.
Bafin said he would receive comments on the planned product intervention measure by July 3, 2025.