Classification of fractional investments as investment instruments

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The active marketing and sale of what are known as ‘fractional shares’ by (foreign) financial institutions to retail clients is an attractive new phenomenon that is gaining in popularity in Belgium as well.

Fractional investing enables investors to determine the amount they wish to invest in an underlying share. In exchange, investors acquire a right to part of a share. Shares that are traded at high prices thus become more accessible to retail investors. This form of investment also makes it easier to diversify one’s investment portfolio. However, this type of investment does not have advantages only. Fractional investors need to be aware that in many cases they are not investing directly in the share itself, but in another type of investment instrument that is issued or created by an entity that is separate from the issuer of the share, with legal and economic characteristics that are substantially different from the share itself. The risks and costs associated with fractional investing may differ significantly from the risks and costs of the underlying share.