New Executive Order on Risk Marking of Investment Products

Date 27 maj. 2011


The Danish Ministry of Economic and Business Affairs has issued a new Executive Order no. 345 of 15 April 2011 accompanied by Guidance Notes no. 22 of 15 April 2011[1] on risk marking of investment products. The Executive Order applies to Danish and foreign financial businesses which facilitate purchases of investment products to retail clients in Denmark, and also applies to Danish and foreign investment advisors doing business in Denmark. The rules also apply to financial businesses run through the establishment of subsidiaries.

Risk marking is a marking system for investment products designed to help retail clients get an overview of whether they might risk losing an investment, parts of the investment or more than the investment, as well as to give a general impression of the complexity of the product before any specific investment is agreed.

Risk marking is structured as a traffic light model in which the individual investment product is placed in the categories green, yellow or red according to the risk level of the product and the general transparency of the investment in question.


Review of the rules

The Executive Order stipulates that any financial business or investment advisor, when advising on investments, no later than the time of the placement of an order for an investment product, must provide information on risk marking on the type of investment product which the order concerns.

However, information on risk marking is not necessary if a retail client contacts a financial business regarding an investment product on his/her own initiative, nor is the financial business obliged to provide the retail client with information on risk marking if the financial business manages purchases of investment products through an electronic trade platform such as online banks. However, the financial business must always make information on risk marking of the product type available to the client.

It is up to the financial business to decide how to provide the client with risk marking information in practice. The information must be given through a permanent medium, e.g. paper or a read-only website.

With regard to trade on an electronic platform, it is also up to the financial business to decide how the information is to be made available to the client. The information must be available in a clearly visible place on the electronic platform.

Marking system

The marking system is based on a categorisation of the risk of a given investment as well as on the transparency of the product character. Investment products are placed in the categories green, yellow or red. Appendix 1 to the Executive Order contains a chart of the investment products in every category. The chart was drafted by the Danish Financial Supervisory Authority, who is also in charge of updating it. The financial business is consequently not in charge of making the assessment of how to categorise the products.

The investment products contained in the green category are relatively simple products. This category contains investment products where the risk of losing the investment is considered quite small. The products listed below, among others, are placed in the green category:

  • Danish government bonds issued in DKK or EUR
  • Government bonds issued by euro members in EUR or DKK
  • Mortgage bonds issued by Danish mortgage banks.

Investments contained in the yellow category are products where the risk of losing the invested amount completely or in part is present, but as with the green category, the products are relatively simple. In the yellow category, products such as the below-listed are placed: 

  • Government bonds issued in other currencies than DKK or EUR
  • Warranty certificates
  • Shares admitted to trade on a regulated market
  • Foreign mortgage bonds

Finally, products in the red category are complex and difficult to assess and/or associated with the risk that the loss in some cases might exceed the invested amount. This category contains, among others, products with a low level of transparency due to the fact that they are comprised by several products. In the red category, products such as the below-listed are placed:   

  • Shares which are not admitted to trade on a regulated market
  • Different types of swaps, including interest swaps, inflation swaps and commodity swaps
  • Options
  • Mortgage deeds

The categorisation

The categorisation is based on the general risk and transparency level of the product type in question, and not on an assessment of the specific product. This means that there might be investment products with different risks within the same category.


The categorisation is made on a product basis and not on a portfolio basis so that retail clients have the possibility of knowing the risk of every product, and not only the risk of any pre-composed package from the financial business.


The return on the investment is not included in the categorisation of the individual investment products, nor is the time frame for each product considered.



If you have any questions or require additional information on the new rules, please contact Attorney Dan Moalem ( or Attorney Lennart Meyer Østenfjeld (

The above does not constitute legal counseling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of a reader’s use of the above as a basis of decisions or considerations.

[1] The guidance notes include several errors, e.g. a reference to the Executive Order, Section 3(4), a section which is no longer included in the Executive Order. The Danish Financial Supervisory Authority will draft new guidance notes.