Restrictions to the distribution of certain OTC derivatives to Belgian retail investors
The Belgian Financial Services and Markets Authority (FSMA) has issued a new Regulation confirming that the distribution of certain derivatives to Belgian retail clients will be restricted as from 18 August 2016.
Following the consultation conducted earlier this year by the Belgian regulator on the possible banning of certain over the counter (OTC) derivatives to retail investors, the FSMA issued a new Regulation confirming that the distribution of certain derivatives to Belgian retail clients will be restricted as from 18 August 2016. The Regulation has been approved by Royal Decree dated 21 July 2016 and published in the Belgian Gazette of 08 August 2016.
The Regulation consists of two elements which apply cumulatively. The first element is a ban on distribution of a few specific types of OTC derivative contracts to consumers via electronic trading platforms. These are:
- Binary options
- Derivative contracts whose maturity is less than one hour, and
- Derivative contracts with leverage, such as contracts for difference (CFDs) and rolling spot forex contracts.
The second element is a ban on a number of aggressive or inappropriate distribution techniques (cold calling via external call centres, inappropriate forms of remuneration, fictitious gifts or bonuses, etc.) used when distributing OTC derivatives to consumers.
Only OTC derivatives are caught by the Regulation. It does not apply to derivatives that are admitted to trading on a regulated market or on a multilateral trading facility. The Regulation supplements the distribution ban that was already in force for certain products, such as life settlements (traded life policies) and financial products with a virtual currency as their underlying.
The FSMA press release and a link to the Regulation can be found here.
