Does Marketing Gold Require a Prospectus?

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Gold has always attracted investors who value its relative stability, especially in turbulent markets. Offering an investment in physical gold raises an important question in financial law: does it meet the notion of an investment instrument under Belgian law? Is a prospectus or an information note required, or nothing?

Different ways to invest in gold

One can invest via a gold tracker (a financial instrument replicating the gold price), derivatives (whose value depends on the gold price), shares in gold-mining companies, or physical gold (bars, coins). The first three fall within the notion of investment instrument under the Prospectus Act: public offers require a prospectus approved by the FSMA (for offers of EUR 5 or 8 million) or an information note (between EUR 500,000 and that threshold). The rules on advertising when marketing financial products to retail clients also apply. By contrast, precious metals are not investment instruments: an offer of physical gold is not subject to the Prospectus Act or the advertising rules.

From a broad definition

The notion of investment instrument, specific to Belgian law, covers a wide spectrum. The legislature wanted a non-exhaustive list so investors always benefit from a prospectus when offered instruments allowing an investment, even novel ones. The broad definition covers all other instruments allowing a financial-type investment, whatever the underlying assets, and investment products in movable or immovable property: rights over such property, organised in an association, joint ownership or grouping, not conferring private enjoyment, whose collective management is entrusted to professionals; and rights allowing a financial-type investment over movable property or an agricultural business, similarly organised and managed, unless they include an unconditional, irrevocable and full delivery of the goods in kind. These categories aim to cover alternative investment products (art, collectibles, old manuscripts, alcoholic drinks, old coins, commodities, plantations, real estate). The FSMA notes that most financial investments in movable goods and agricultural businesses (wine, for example) now fall within the Prospectus Act, unless the goods are unconditionally, irrevocably and fully delivered to the consumer in kind.

To a broad interpretation of the notion of investment instrument

Various institutions (credit institutions, currency exchanges) offer clients physical gold, either by real delivery or through custody and deposit solutions. In the latter case, the gold may be deposited on a securities account, held within the institution. What if the gold is not deposited in an individual safe in the client’s name? Article 3, § 2, 2° of the Prospectus Act provides that precious metals are not investment instruments, so marketing physical gold should not require a prospectus. Storage is, at first sight, merely a deposit modality without impact on the classification.

However, in our practice, the FSMA appears to adopt a broad interpretation. It considers that the exclusion of precious metals does not mean that all constructions based on precious metals are automatically excluded. For physical gold stored in a common vault, the FSMA notes that no unconditional, irrevocable and full delivery is provided. Where clients hold a (co-)ownership right over gold stored with the institution (i), the gold is stored in joint ownership (ii), and it is potentially managed by the institution where it is stored (iii), such marketing should potentially require a prospectus and be subject to the advertising rules.

This article is a translation. Only the French version is authoritative. It is provided for information purposes and does not constitute legal advice.