Comments from EU Member States were compiled in a document dated 15 September and obtained by EUROPE regarding their respective positions on the retail investment strategy. While the EU27 welcomed the text presented by the Commission on 24 May (see EUROPE 13187/21), several of them want to go further on certain aspects.
The subject of commissions paid to advisers, brokers and other intermediaries had been a hot topic in the weeks leading up to the Commission’s proposal (see EUROPE 13178/20). According to the document, no Member State seems to be questioning the fact that these commissions are not banned.
However, for the Netherlands, “transparency on commissions is necessary, but not sufficient”. While they welcome the “proposed strengthening of disclosure requirements concerning the impact of the payment of incentives to the adviser on potential conflicts of interest as well as on costs and expected returns”, they also insist that this information should be provided “at a very early stage in the client’s journey so that they can make an informed choice about the investment service they are considering”.
Luxembourg, for its part, states that “existing incentive disclosure requirements should be further strengthened”, while France stresses that this information should be “clear, easy to understand and short” so that “this additional transparency requirement is beneficial for retail investors”.
Comments were also submitted on the issue of financial education material, which aims to strengthen the financial culture of individuals. Belgium wants this to be limited to “factual information” and not to “directly or indirectly promote financial instruments or services”.
The Netherlands shares this view and draws attention to the fact that “the current proposal entails the risk of communications being described as financial education material when they are in fact commercial communications”. It added: “We suggest incorporating additional safeguards”.
The Commission’s proposal also provides for the rules to be relaxed in terms of restrictions so that investors can qualify as professionals. The wealth criterion would be changed to a portfolio of financial instruments in excess of €250,000 over the last 3 years, compared with 500,000 previously.
On this point, Estonia questions whether it is “necessary and justified” to take into account the last 3 years, to avoid the administrative burden weighing too heavily on investors. The Netherlands is simply proposing to abolish the three-year concept. For others, such as Portugal, such requirements could be accepted, given that “the investor can benefit from access to other types of financial instruments and that the change of category is made at the investor’s request”.
‘Particularly risky’ products and transposition deadlines
Discussions will also have to be held on the deadlines set by the Commission for transposing the texts into national law and implementing them. Bulgaria, for example, considers that “the proposed period for introducing the omnibus directive into national legislation, set at 12 months, and the proposed period for its implementation, set at 18 months, are too short and should be extended by at least 6 months for each period”.
Other points have been raised by Member States, such as the provisions relating to the development and updating of guidelines for which ESMA would be responsible, particularly with a view to helping investment firms, insurance companies and intermediaries to identify “particularly risky” investment products. On this point, several Member States, such as Luxembourg and Austria, are calling for clarification of the notion of “particularly risky”.
The Member States also shared their initial observations on investor protection against misleading marketing practices, particularly by influencers on social networks.
Luxembourg proposes to specify which documents and activities would not fall under the definition of commercial communication so as not to “discourage” investment product providers from supplying financial education documents.
Italy says that future work on this issue could be based on an ESMA report on retail investor protection published in April 2022. ESMA recommended that a definition of marketing communications be included in the ‘MiFID II’ disclosure requirements text - partly revised by the retail investment strategy - to clarify that online advertising is a marketing communication tool in the same way as promotions, sales branding and campaigns.
Belgium, for its part, puts forward the possibility that the competent authorities could “require prior notification of market communications in order to verify ex ante the compliance of such communications with this Directive and other applicable requirements, for example whether market communications are identifiable as such and whether all the information contained in the market communications is presented in a fair, clear and not misleading manner”.
To see the document: https://aeur.eu/f/8n1 (Original version in French by Thomas Mangin)