The Member States will be meeting on 4 and 5 October as part of the EU Council working group on the retail investment strategy (see EUROPE 13252/17). A significant part of the discussions will focus on the issue of a partial ban on commissions paid in the case of execution-only sales - i.e. ‘with no advice’ - on which the Member States are divided.
According to the document, which EUROPE has obtained a copy of , “quite a few Member States do not support the partial ban proposed by the Commission due to potential negative implications affecting both supply and demand”. In their view, such a provision could reduce the profitability of reception and transmission of orders (RTO) services. This could lead to a reduction in the range of products on offer and an increase in the price of these services.
These Member States believe that “the partial ban could encourage firms to offer non-independent investment advice” and that “the development of new, innovative business models could be hindered”.
Furthermore, in addition to “the lack of data mak[ing] it difficult to evaluate potential negative unintended consequences”, these Member States also argue that such a ban could lead to “a possible exclusion of low-income retail investors from this investment service if the market starts to apply explicit fees”, and that the possible subsequent introduction of fees could “increase retail investors’ interest in unregulated investment instruments”.
However, not all Member States have the same position on this issue. One, for example, suggests limiting - rather than prohibiting - the payment of commissions to the distributor when selling an insurance-based investment product. This commission would only be paid in full if the product sold meets the consumer’s needs.
Other Member States support the partial ban proposed by the Commission in order to “avoid potential conflicts of interest”. Conversely, one of the 27 Member States considers the partial ban to be “a step forward”, but regrets that a total ban is not being considered. Another suggests leaving it up to the Member States to decide whether or not to depart from the rules on the payment of commissions because of the “asymmetric impact” that such a ban could have on domestic capital markets.
Some Member States in favour of a five-year deadline for the revision clause
The Member States will also consider the revision clause proposed by the Commission, set at three years after the entry into force of the text. At that point, the Commission could decide to ban the payment of commissions altogether. “The possibility of a ban remains on the table. Working with professionals and regulators will lead us to results”, said the Commissioner for Financial Services, Mairead McGuinness, on 24 May when she presented the retail investment legislative package (see EUROPE 13187/21).
Several Member States would like to amend this provision and set the deadline at five years, considering that this would be a “better time horizon for a comprehensive assessment of the impact of the new measures”.
Member States will also address the issue of Article 29 of the Insurance Distribution Directive (IDD) on insurance distribution rules. On this point, the text stipulates in particular that the ban on commissions should not apply to minor non-monetary benefits with a total value of less than €100 per year or “of a scale and nature such that those benefits do not impair compliance with the insurance intermediary’s or insurance undertaking’s duty to act in the best interests of their customer provided those benefits have been clearly disclosed to the customer”. On this point, one of the 27 Member States has asked for clarification as to whether these conditions are cumulative or not.
To view the document: https://aeur.eu/f/8tt (Original version in French by Thomas Mangin)