Through a judgement handed down on 4 March 2016, the Belgian Council of State (the “CS”) has resolved to dismiss an action for annulment in respect of the Regulation establishing a ban on the distribution of certain non-conventional financial products to retail clients.
This Regulation was adopted on 3 April 2014 by the Belgian Financial Services and Markets Authority (the “FSMA”) with a view to prohibiting the marketing of the following products:
- traded life policies (or life settlements) or products where the return directly or indirectly depends on one or more traded life policies;
- products where the return directly or indirectly depends on virtual currencies (e.g. bitcoin);
- investment instruments (other than units of undertaking for collective investment) where the return depends directly or indirectly on an alternative investment fund investing in non-mainstream asset(s) (e.g. artworks, liquors, raw materials, precious metals);
- class 23 insurances linked to an internal fund investing in non-mainstream asset(s) or of which the return depends directly or indirectly on an alternative investment fund investing in non-mainstream asset(s).
On 22 July 2014, a claim was lodged with the CS by SETTLEMENTS S.A., a Belgian company whose business was focused on life settlements.
Summarily, the pleas in law came forward on two levels.
As regards the nature of the life settlements, the claimant challenged the alleged speculative, convoluted and fraud-easing features. The CS found that such products were indeed speculative, considering their random and solely profit-seeking qualities. It was also confirmed that the life settlements’ ins and outs were too demanding in respect of retail clients’ capabilities.
As regards the measure in itself, the claimant layed emphasis on the patent lack of proportionality expressed by the banning approach. Furthermore, he argued that similar results could have been obtained by imposing accrued transparency and monitoring requirements (as already in place, inter alia, through MiFID implementation). The CS upheld that preferring a ban provided the greatest certainty of granting an effective solution for the protection of investors.
Since the claim failed to stand before the CS, the Regulation can now apply unabated.
Romain Rolland (romain.rolland@cms-db.com)
Benoît Vandervelde (benoit.vandervelde@cms-db.com)
