ESMA Supports AFM’s Restriction on Turbos

The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, expressed its support to the proposed measures of The Dutch Authority for the Financial Markets (AFM) to restrict the marketing, distribution or sale of turbos, saying the AFM's proposed measures are justified and proportionate. 

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The AFM considers turbos as high-risk leveraged products and believes 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 2020, AFM held consultations on measures to restrict the marketing, distribution or sale of turbos.

Turbos are very similar to contracts for difference (CFDs)，through which investors speculate whether or not the price of an underlying, such as a share, an index or a currency will rise or fall. 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.

With ESMA's opinion, all National Competent Authorities (NCAs) may consider monitoring turbos in their respective markets to assess whether similar risks for retail investors as those identified by the AFM could arise there.