The EU Council’s Working Party on Financial Services and the Banking Union will meet on 4 and 5 September to try to make progress on the legislative package on the Retail Investment Strategy presented by the Commission on 24 May (see EUROPE 13187/21).
Member States will seek a common approach to the issue of risk warnings in the information provided to retail customers when a product is particularly risky.
Although, as indicated in a document of which EUROPE has obtained a copy, many Member States have expressed their support for the obligation to include such warnings, certain delegations have made suggestions.
For example, some countries want to clarify which products are considered ‘particularly dangerous’ and add indicators on certain aspects, such as volatility, complexity, cost/return ratio or categories of packaged retail and insurance-based investment products. Several provisions in the text already empower the European Securities and Markets Authority (ESMA) to provide guidelines in this area. Other Member States suggest further alignment with the MiFIR regulation on markets in financial instruments (see EUROPE 13212/14), to prevent the definition from being too open-ended.
On the other hand, some of the EU27 are opposed to issuing risk warnings, concerned that this would impose too great an administrative burden on companies. To make their case, certain delegations also argue that there is insufficient convergence between Member States.
Some Member States were also reluctant to give ESMA and the European Insurance and Occupational Pensions Authority (EIOPA) responsibility for supervising and enforcing warnings, stating that the competent national authorities had proved effective in this area.
Marketing and the ‘Key Information Document’ at the heart of discussions
The Commission’s text also provides for a relaxation of restrictions so that investors can qualify as professionals. The wealth criterion for a client proposed by the Commission for identification as a professional would be reduced from €500,000 to €250,000 and would be calculated on the basis of an average over the previous three years. While the provision has received broad support among Member States, some are concerned about the potential increase in administrative burden inherent in the need to meet this criterion during this period.
Discussions at the working group are also expected to focus on protecting investors against misleading marketing practices, particularly by influencers on social networks. Certain Member States called for clarification of the conditions that must be met by a strategy, the use of a tool or technique to be considered a marketing practice, and the definitions of ‘reach’ and ‘effectiveness’. Some have also called for a reduction in the scope of the definition so that “certain activities, such as improving distribution channels or data analysis techniques” are not classified as marketing practices.
The ‘Key Information Document’, designed to provide clear information on the main features of a product to consumers wishing to invest their savings, should also be on the menu of Member States. A number of issues are expected to be raised, in particular the inclusion in these documents of past performance and performance scenarios which, until now, can only be provided in a separate document.
Final vote in European Parliament Committee hoped for January 2024
Work on the retail investment strategy is also continuing in Parliament. The deadline for the second round of comments on the remaining aspects of the proposal is 14 September. An exchange of views on the dossier will reportedly take place six days later in the European Parliament’s Committee on Economic and Monetary Affairs (ECON). The report is due to be presented at the end of October. The amendments will then be examined and discussions will continue before a final vote in ECON hoped for at the end of January 2024, a source told EUROPE on Wednesday 30 August.
To see the documents: https://aeur.eu/f/8dv; https://aeur.eu/f/8dw (Original version in French by Thomas Mangin)