Diamond is forever, not for Consob

06 Feb 2017

With a note published on Tuesday, January 31, Consob wanted to clarify some aspects on the sale of diamonds through the banking channel. Consob has received reports from consumer associations on commercial proposals for the purchase and sale of stones carried out “by specialized companies operating through their own websites or through bank branches”, is written in the document. In these cases, Consob continues, “diamonds are generally presented as a durable, safe investment, with a possible prospect of economic appreciation over time and with an important emphasis on good-shelter characteristics”.

The controlling authority pay attention to the purchase prices of the stones, which “would exceed their market value. Furthermore, it is not clear, due to the lack of transparency of the proposals, which part of the price is due to the actual cost of the diamond and which is instead represented by the commissions applied by the proposing companies and by the banks at the time of the transaction “. Consob then recalls that the regulation investment services “is not applicable to the sale of diamonds or on other tangible assets even if sold through the banking channel or, in such cases, an information sheet is due”. However, for Consob the sale of a tangible asset such as diamonds “could assume the characteristics of a financial product’s offer if explicitly envisaged elements such as, for example, promises of return, repurchase obligations, realization of profits or bonds to the enjoyment of the good “.

The Antitrust Authority opened two proceedings “in the field of unfair commercial practices” against two companies that have been operating on the market for years and sell diamonds through the bank.

“Natural diamond is not a financial investment, if this means an investment with an expectation or a guarantee of return or liquidation”, says Marco Pocaterra, CEO of Diamond Love Bond. The reason? “Doesn’t exist a open price list on diamonds, like stocks or bonds: Antwerp and Tel Aviv are historically the squares where diamonds are exchanged, but the access to trading is reserved only for sector operators”, adds Pocaterra.

Borned in Antwerp in 2005, Diamond Love Bond sell natural diamonds through Ubi Banca and Banco di Desio banks: «A choice made for reasons of tax transparency and protection for the client, who receives a certificate of authenticity with the diamond» . Thanks to an exclusive agreement made with Rapaport Group the stones are sold with a very restrictive Rapaport Investment Diamond Report certificate. It includes only high quality diamonds combined with an analysis of GIA – Gemological Institute of America. Today are emerging strong diamond exchange web platforms (Rapnet and Idexonline the largest), but they are not accessible to the final investor. Diamond prices historically refer to the Rapaport Diamond Report, updated every week, a general indicator between supply and demand. As a result, the final price could be a big discount or even a premium compared to the price list.

To make more transparent and liquid the price list Martin Rapaport, head of its brilliant diamond empire in New York (Rapnet claims to trade $ 6.2 billion a year), he wanted to clarify the quality of the diamonds in the price list to reduce the gap between supply and demand. Rapaport has tried, in the past, to create a real bag of diamonds like raw materials such as gold and platinum, but he wasn’t be able to do it. There is a structural problem: while two Generali’s actions are perfectly equal, there are no two identical diamonds in nature: at least they resemble each other.

Milan & Finance, 06/02/2017

Written by Elena Dal Maso