EU Commissioner for Financial Services Mairead McGuinness announced on Thursday 27 April at the Eurofi high-level seminar in Stockholm that she is dropping the ban on broker inducements that was originally planned as part of the future retail investment strategy (see EUROPE 13106/21).
“I want to be clear: even if we do not propose a ban on all inducements now, it does not mean a free pass for the financial sector”, said Ms McGuinness.
Rather than a ban, the future text should include certain measures, including a transparency obligation for advisory activities and a tightening of the conditions under which inducements are allowed, in order to better regulate the benefits received by advisers from third parties who want their products to be sold.
The text also provides for “a better breakdown of costs to make it easier for consumers to compare different options”, said the European Commissioner for Financial Services.
Inducements for execution-only transactions would be prohibited. “It’s not right that inducements are paid even when there is no advice relationship at all with a client”, McGuinness insisted.
Stronger safeguards should be put in place to “determine when incentives can be paid and when they should not be”, the EU commissioner said.
Finally, while the European Commission decided to opt for a position where “those who felt that a total ban on inducements might be too disruptive at this stage”, this may well change in the future, thanks to “a strong review clause in the proposed legislation”.
“That will allow us to bring in a full inducement ban at a later stage if necessary”, McGuinness warned.
The ban on broker inducements had provoked strong opposition from some industry professionals (see EUROPE 13099/12), ministers (see EUROPE 13121/4, 13118/10) and MEPs (see EUROPE 13142/28), prompting the European Commission to reconsider. It had to postpone the presentation of its ‘Investment’ package, which includes the retail investment strategy. The package, which also includes a text on improving the framework for retail investment, is due to be finally be unveiled on 24 May. (Original version in French by Thomas Mangin)