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The Regulation applies to financial products that are based on so-called non-mainstream or non-standard assets. At a time of low interest rates, such products are often promoted with the claim that they offer both security and a high return and are independent of the traditional financial markets. In reality these are products with high risk, little liquidity and considerable complexity for retail consumers.
The Regulation bans the marketing of several classes of products:
First, financial products that depend on a life settlement, in other words, traded life assurance policies. These products confer on their buyers a right to the benefit an insurer will pay upon the death of the insured person. The return received depends in part on when the insured person dies. Apart from the ethical aspects, these are complex and risky financial products ill-suited to retail clients.
Second, the Regulation applies to products that consist essentially of derivatives based on virtual currencies such as Bitcoin. The FSMA and the National Bank of Belgium recently published a warning containing a non-exhaustive list of risks linked to virtual currencies like Bitcoin: these include operating risk, the risk of hacking the virtual money platform, the exchange rate risk and the lack of a legal guarantee that it can be exchanged for its face value. Investing in derivatives of virtual currencies can multiply these risks through a potential gearing effect.
The ban also applies to notes and class 23 insurance contracts where the return depends on an alternative investment fund that invests in non-standard assets and to class 23 insurance contracts whose return depends on an internal fund invested in such non-standard assets. These types of assets include items such as commodities, artworks, and consumer products like wine or whisky. Such speculative products are generally opaque, illiquid and difficult for retail clients to evaluate.
Full Regulation (Dutch, French)