CONSOB Updates Communication on Complex Financial Products

The Italian Securities and Exchange Authority (Commissione Nazionale per le Società e la Borsa) (“Consob”) announced that it has updated its communication regarding the distribution of complex financial products to retail customers. The market regulator said that it made such updates to increase the level of protection of retail customers, who are considered to be vulnerable in the complex financial products market. According to Consob, the complexity of the financial products implies that retail customers are exposed to higher risks. The watchdog, therefore, stated that there is a need for continuous monitoring to ensure that such customers are not exploited because of their lack of market experience.

In the Communication, Consob updated good practices to ensure that financial intermediaries are accountable for their relationship with retail customers. The Communication follows European Securities and Markets Authority (“ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term”) opinions regarding “MiFID practices for companies selling complex products” and “Good practices for product governance arrangements.”

Consob identified complex products and emphasized that intermediaries must adopt good practices when providing such products, to ensure they are in line with the target clients’ profiles and to avoid damaging impacts on retail customers.

In the communication, Consob reminds financial intermediaries about their duty to apply criteria of coherence between the products offered and the customers’ profiles. Furthermore, the watchdog stated that it expects intermediaries to submit to the ‘potential clients’ a disclosure concerning the risks (unsuitability) involving the distribution of the complex products. Consob also reminded the intermediaries to exercise specific controls during the entire process of distribution of such products. Finally, intermediaries are expected to implement the Communication as soon as possible and to inform the Authority of decisions and measures adopted.

Enabling Regulatory Solutions

In December last year, Consob blacklisted several financial services platforms considered illegal investment platforms. The lists included names of financial platforms, majorly associated with cryptocurrencies, forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term, among others that were providing services in Italy illegally. Consob drew investors' attention to the importance of adopting the greatest diligence so that to make informed investment choices, adopt common-sense behavior, and safeguard their savings. The regulator urged investors to check in advance that financial operators with whom they are investing are authorized and provide financial products whose prospectus has been approved and published.