Article 42 › 2

A competent authority may take the action referred to in paragraph 1 if it is satisfied on reasonable grounds that: (a) either (i) a financial instrument, structured deposit or activity or practice gives rise to significant investor protection concerns or poses a threat to the orderly functioning and integrity of financial markets or commodity markets or to the stability of whole or part of the financial system within at least one Member State; or (ii) a derivative has a detrimental effect on the price formation mechanism in the underlying market; (b) existing regulatory requirements under Union law applicable to the financial instrument, structured deposit or activity or practice do not sufficiently address the risks referred to in point (a) and the issue would not be better addressed by improved supervision or enforcement of existing requirements; (c) the action is proportionate taking into account the nature of the risks identified, the level of sophistication of investors or market participants concerned and the likely effect of the action on investors and market participants who may hold, use or benefit from the financial instrument, structured deposit or activity or practice; (d) the competent authority has properly consulted competent authorities in other Member States that may be significantly affected by the action; (e) the action does not have a discriminatory effect on services or activities provided from another Member State; and (f) it has properly consulted public bodies competent for the oversight, administration and regulation of physical agricultural markets under Regulation (EC) No 1234/2007, where a financial instrument or activity or practice poses a serious threat to the orderly functioning and integrity of the physical agricultural market. Where the conditions set out in the first subparagraph are fulfilled, the competent authority may impose the prohibition or restriction referred to in paragraph 1 on a precautionary basis before a financial instrument or structured deposit has been marketed, distributed or sold to clients. A prohibition or restriction may apply in circumstances, or be subject to exceptions, specified by the competent authority.

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Source: EUR-Lex CELLAR · retrieved 2026-09-04