Brussels, 03/07/2012 (Agence Europe) - The European Commission has presented its legislative package which aims to provide better protection for consumers of retail financial instruments. The package contains three texts: - a proposal for a regulation on key information documents for packaged retail investment products (PRIPS) (see EUROPE 10611); - a revision of the Insurance Mediation Directive (IMD) (see EUROPE 10618); - and the review of European legislation on Undertakings for Collective Investment in Transferable Securities (UCITS).
“Retail products must be safer, information standards must become clearer, and those selling products must always be subject to the highest standards. That is why we have adopted a package solely dedicated to consumers, so that they can choose financial products based on clear and sound information and professional advice which puts the consumer's interests first”, said Internal Market Commissioner Michel Barnier in a press release.
PRIPs. The creators of retail investment products, and in some cases the distributors, will have to produce key information documents (KIDs). Drafted in plain-speaking, non technical language, KIDs should allow an investor to clearly identify the product (nature, objectives, risks entailed and potential benefits) and inform the investor of past and potential results. Other data may also be required for products intended for savings/pensions. In the event of misleading, imprecise or incomplete information, the retail investor will be able to withdraw by unilateral decision and the company responsible for producing standardised documents will be held liable under civil law.
IMD. Revision of the insurance mediation directive currently regulates selling practices for all insurance products. The Commission is proposing the same level of consumer protection by creating common standards of protection across all insurance sales, however an insurance product is bought (directly from an insurance company or indirectly from a broker). At present, there is no common standard of protection as European rules do not cover sales through insurance brokers. Potential investors will be entitled to receive honest advice and clear information on the subject of the professional status of the person selling them an insurance product. Rules will be introduced to address more effectively the risks of conflict of interest, including disclosure of the remuneration received by sellers of insurance products. These strengthened rules will make it easier for insurance intermediaries to operate cross border, creating a real internal market for insurance.
UCITS. Revision of the directive on undertakings for collective investment in transferable securities aims at a clearer definition of the tasks and liabilities of all depositaries acting on behalf of a UCITS fund. Clear rules relating to the remuneration of UCITS managers are also introduced. For example, remuneration should not encourage excessive risk-taking. Remuneration policy should also be better linked to the long-term interest of investors. Finally, fines imposed should always exceed any potential benefits derived from violation of the provisions. (MB/transl.jl)