Tighter Regulations for Turbo Certificates
The Federal Financial Supervisory Authority (BaFin) has announced that trading in turbo certificates in Germany will be more strictly regulated in the future. This decision is based on the results of a comprehensive market study that uncovered significant deficiencies in investor protection.
Background and Concerns
The report shows that German retail investors lost approximately 3.4 billion euros with turbo certificates between 2019 and 2023. On average, losses amounted to around 6,400 euros per investor. The high complexity of these products and the controversial sales practices, which significantly contribute to the losses, are highlighted. Especially the short holding periods pose a risk: almost 70% of the certificates are held for less than 24 hours, which increases the chances of losses.
Planned Measures by BaFin
To improve investor protection, BaFin has proposed three key measures:
- Standardized Risk Warnings: Providers must clearly warn of the high risks of loss. These warnings are intended to make it clear that seven out of ten retail investors incur losses.
- Knowledge Test for Investors: Investors must regularly pass knowledge tests that assess basic knowledge about turbo certificates. This test must be repeated every six months.
- Ban on Purchase Incentives: Monetary incentives such as bonuses for purchasing these products will be prohibited.
Potential Impact
The proposed measures are expected to have far-reaching consequences for the investment landscape of retail investors. Increased transparency through warnings and knowledge tests could influence investors’ strategies by encouraging them to consider less risky investment alternatives. Additionally, the changed legal environment could affect the supply and demand for turbo certificates.
BaFin has set a deadline of July 3, 2025, for receiving feedback on the proposed product interventions.