The European Commission will present its investment package on 24 May, which includes two texts, one of which is a retail investment strategy (see EUROPE 13172/8). The proposal, a copy of which has been obtained by EUROPE, provides for the amendment of five existing pieces of legislation (‘omnibus directive’) in order to create the necessary conditions to increase the participation of retail investors in capital markets.
In practice, the text confirms the announcement by EU Financial Services Commissioner Mairead McGuinness on Thursday 27 April in Stockholm that she would abandon the ban on commissions for advisers, brokers and other intermediaries (see EUROPE 13171/15), which was originally planned as part of the future retail investment strategy (see EUROPE 13106/21).
“The impact assessment concludes that an EU-wide full ban would be the most effective measure to remove or significantly reduce potential conflicts of interest, by reducing an important source of consumer detriment. However, a full ban on inducements would entail significant and sudden impacts on existing distribution systems, with consequences that are hard to predict”, the paper points out.
The Commission has opted for a “staged” approach. In particular, provisions are included in the text to prohibit the payment of commission in situations where no advisory services have been provided to clients. The list of information to be provided to customers would be increased. The Commission should monitor the impact of its measures on the market.
The ‘best interests of the customer’ principle applied in the MiFID II directive, on information requirements, product governance and position limits, and in the IDD directive, on the provision of insurance or reinsurance distribution services to third parties, would also be reinforced.
The Commission should evaluate the effects of the commission regime 3 years after the adoption of the legislative package. A report would then be sent to the European Parliament and the Council of the EU. On this basis, the Commission may decide to propose additional measures, including a ban on commission payments in the future.
“This will allow us to introduce a total ban on commissions at a later stage, if necessary”, McGuinness warned, speaking alongside the Eurofi high-level seminar.
Insurers also affected
In addition to the MiFID II and IDD directives, the text to be presented by the Commission also provides for the harmonisation of existing rules under the text on the taking up and pursuit of insurance activities in the EU (‘Solvency II’), those on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (‘UCITS’) and those on alternative investment fund managers (‘AIFMD’).
The text requires investment firms, insurance intermediaries and insurance undertakings distributing insurance-based investment products to include “appropriate” risk warnings in all disclosure documents concerning particularly risky products.
“There was still some uncertainty about whether this proposal would also affect the insurance industry, and it does”, a source told EUROPE.
The European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) would be responsible for developing guidelines clarifying the concept of particularly risky financial products.
Product oversight and governance rules would be changed to ensure that undue costs are not charged and that products offer value for money to retail investors.
In addition, the Commission’s proposal also aims to ensure high professional standards for investment advisers. The rules in this area would be revised to strengthen and align the knowledge and skill requirements for investment advisers set out in ‘MiFID II’ and ‘IDD’.
An easing of restrictions for investors to qualify as professionals should be put in place. The wealth criterion for a client to be identified as a professional would be reduced from €500,000 to €250,000.
See the document: https://aeur.eu/f/6t2 (Original version in French by Thomas Mangin)