On 8 January 2016, the Financial Services and Markets Authority (“FSMA”) initiated a consultation on a draft regulation governing the distribution of certain derivative financial instruments to retail clients. The FSMA, which has over the years been pointing out the particularly risky nature of these derivatives, noted that a great deal of these instruments were being distributed to retail clients in Belgium by means of dedicated electronic trading platforms. In that respect, the draft regulation sets up a proper groundwork and aims at tackling the issue by pursuing two main cumulative objectives.
Firstly, the FSMA seeks to prohibit the marketing of a series of over-the-counter (“OTC”) derivative instruments to retail investors. The instruments affected will fall into one of the following categories:
Given the above, instruments such as binary options, contracts for difference and rolling spot forex transactions will clearly be in the spotlight.
Secondly, the FSMA is taking action to mitigate all kinds of distribution techniques seen as aggressive or inappropriate towards retail clients in respect of OTC derivative instruments. This means that marketing could be banned if at least one of the following practices is undertaken:
The regulation will enter into force upon finalization of the provisions by the FSMA and subsequent approval by royal decree. All sector players were invited to submit their responses in writing by 25 January 2016 at the latest.