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Quick Take
On 15 October 2025, the German Federal Financial Supervisory Authority (BaFin) issued a general administrative order restricting the marketing, distribution and sale of "turbo certificates"1 In regulatory terms under EU law, Turbos are classified as financial instruments within the meaning of MiFID II (Article 4(1)(15) read with Annex I, Section C), and—under their usual issuance structure—are bearer bonds that synthetically track the underlying's price movements with leverage.
The intervention is grounded in the product intervention powers under Article 42 of MiFIR, read together with Section 15 of the German Securities Trading Act (WpHG). These provisions empower BaFin to limit or prohibit the distribution of specific financial instruments where they present significant risks to retail investors. In regulatory terms under EU law, turbo certificates fall within the MiFID II definition of financial instruments (Article 4(1)(15) in conjunction with Annex I, Section C). In their typical issuance form, they are unsecured bearer debt securities—usually issued by banks or securities firms—that synthetically replicate the price movements of an underlying asset with embedded leverage.
Turbo certificates (also referred to as Knock Out Zertifikate, Turbos or Mini Futures) provide leveraged long or short exposure to an underlying such as a share, equity index, currency pair, commodity or futures contract. The instruments enable investors to participate to a disproportionate extent in price movements because only a fraction of the notional exposure is funded by the investor; the remainder is economically financed by the issuer via an embedded financing level. A defining feature is the knock out mechanism: a fixed barrier price is specified at issuance and, if the underlying touches or breaches that level, the certificate terminates immediately. In such circumstances investors will generally incur a total loss of the capital invested, even where the barrier is only briefly crossed or the underlying subsequently moves in the anticipated direction over the longer term.
BaFin's intervention follows an extensive market study indicating that approximately 74% of retail clients incurred losses when trading turbo certificates between 2019 and 2023 (i.e. during the COVID pandemic). The average loss per investor was about €6,358, with aggregate losses estimated at over €3.4 billion. BaFin grounds its measures in the combination of high product complexity, occasionally aggressive marketing practices and, in many cases, insufficient investor understanding. The objective is to strengthen investor protection by placing greater emphasis on transparency, investor education and risk assessment within distribution channels.
After a public consultation and review of more than twenty submissions, BaFin extended the implementation period for the new rules from the originally proposed three months to eight months, allowing firms sufficient time to make technical and organisational changes. During the hearing, institutions highlighted the need for additional time to integrate enhanced risk warnings and investor knowledge checks for turbo certificates into their trading and onboarding systems. BaFin has concluded that a blanket prohibition is
Key takeaways
Three key protective measures
BaFin is issuing three key protective measures that affect all addressees (intermediaries, issuers and providers) who sell turbo certificates to retail investors in Germany:
- Mandatory risk warning:
The addressees are obliged to display a standardised risk warning, which can be found in Annex I of the general administrative order. This must clearly state that seven out of ten retail investors suffer losses when trading turbo certificates. The risk warnings must be clearly visible in every communication relating to the marketing, distribution and sale of turbo certificates. Intermediaries, issuers and providers must ensure that third parties who advertise turbo certificates on their behalf also include this risk warning in their communications relating to turbo certificates. - Prohibition of purchase incentives:
The addressees are prohibited from offering small investors any kind of advantage in connection with the distribution, sale or marketing of turbo certificates that could induce them to trade in turbo certificates. This prohibition covers both monetary and non-monetary advantages. For example, order fees may not be reduced or waived for turbo certificates, nor may new customer bonuses be granted. Analysis tools, tutorials, training courses or the provision of stock market prices are not considered prohibited benefits. - Knowledge test:
Before retail investors purchase turbo certificates, they must answer at least six out of eight questions provided by BaFin on trading these products in Annex 2. This is to verify that retail investors understand how the products work. Annex 2 of the general administrative order stipulates that the knowledge test must be in a multiple-choice format and specifies the questions and possible answers. This knowledge test must be repeated at least every six months. It should also be noted that the new measure does not affect the obligation to carry out the necessary suitability assessment. BaFin does not want its measure to be understood as a supplement or adjustment to the suitability assessment but emphasises that it is a separate instrument for the protection of retail investors. Professional clients are exempt from this obligation and can continue to trade without taking the test.
Implementation deadline
Relevant firms must implement the new measures by 16 June 2026 at the latest. Following a consultation, the deadline was extended from the original three months to eight months to give institutions sufficient time to integrate the knowledge queries and risk warnings on turbo certificates into their trading systems from a technical and organisational perspective.
Key considerations
The decision has far-reaching practical consequences for all market participants offering turbo certificates in Germany.
How does the BaFin measure affect the various parties concerned?
The BaFin measure affects issuers, providers and intermediaries
of turbo certificates equally, but leads to different
implementation requirements as their functions in the sales process
vary. Issuers and providers are primarily responsible for including
the mandatory risk warning in all marketing and sales documents.
Intermediaries must also ensure that customers pass a knowledge
test before purchasing a turbo certificate and do not receive any
purchase incentives. Investors who do not pass the test initially
are temporarily prohibited from purchasing turbo certificates but
may repeat the test immediately. In addition, intermediaries are
obliged to ensure compliance with the risk warning obligation, even
in the case of commissioned third parties.
The implementation of the general administrative order will likely
lead to significant organisational and technical adjustments,
particularly due to IT costs and training expenses. Smaller
institutions will be comparatively more burdened as a result, but
no exceptions have been granted. Institutions that only sell turbo
certificates to professionals are not affected by the measures.
Dealing with existing positions
For customers who already have turbo certificates in their securities accounts, the general administrative order has no effect on the products they hold. However, the new access requirement also applies to future transactions: even experienced investors must pass the knowledge test before they are allowed to purchase further turbo certificates.
Extraterritorial effects
This measure by the BaFin also has explicit extraterritorial effects, as it targets all addressees that reach consumers in Germany, regardless of where the company is based. As the BaFin's general administrative order is addressed to a group of recipients that is not precisely defined, it also covers foreign investment firms that distribute, market or sell turbo certificates to retail investors based in Germany on a cross-border basis under the freedom to provide services in the European Economic Area (EEA). As a result, the measure extends beyond national borders and enforces a uniform level of protection for all retail investors based in Germany – regardless of whether the provider, intermediary or issuer is based in Germany or abroad. The extraterritorial effect serves to ensure that foreign market participants also comply with the requirements when doing business in the German market and thus support consistent application of investor protection principles.
Similar measures abroad
Similar regulatory developments can already be observed in other EEA Member States or could follow in the future, as increasing emphasis is being placed on protecting retail investors in complex financial products. In neighbouring European countries supervisory authorities are considering similar restrictions to minimise risks for private investors. For example, due to significant concerns regarding investor protection, the Dutch Authority for the Financial Markets (NL-AFM) has already restricted the marketing, distribution and sale of turbo certificates to retail investors in the Netherlands with its product intervention measure of 30 June 2021.
Outlook
The BaFin measure suggests that BaFin is increasingly focusing on prevention rather than introducing outright bans when it comes to investor protection. The effects of these measures on turbo certificates are a first step, and it remains to be seen whether they can be transferred to other similarly complex financial products. It will be interesting to see whether the BaFin will take similar measures to protect small investors in other product groups in the future.
Footnote
1. Turbo Certificates (often called Knock-Out Zertifikate, Turbos, or Mini-Futures) are typically issued as unsecured bearer debt securities by banks and securities firms. Economically, they provide leveraged exposure—long or short—to an underlying such as an equity, equity index, currency pair, commodity, or futures contract. A defining feature is the "knock-out" mechanism: if the underlying touches or crosses a pre-set barrier price, the certificate terminates immediately, with investors generally suffering a total loss of their invested amount. In regulatory terms under EU law, Turbos are classified as financial instruments within the meaning of MiFID II (Article 4(1)(15) read with Annex I, Section C), and—under their usual issuance structure—are bearer bonds that synthetically track the underlying's price movements with leverage.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
