On Wednesday, 24 May, the European Commission published a new package of legislative proposals as part of its Retail Investors Strategy “that places the consumers’ interests at the centre of retail investing.”
With the new package, the Commission aims to empower retail investors to make investment decisions that are aligned with their needs and preferences, ensuring that they are treated fairly and duly protected. According to the Commission, this will enhance retail investors’ trust and confidence to “safely invest in their future and take full advantage of the EU’s Capital Markets Union.”
When presenting the package, European Commissioner for Financial Services, Financial Stability and Capital Markets Union, Mairead McGuinness said that “this is the most ambitious legislative proposal since the inception of EU financial regulation,” adding that want to encourage European citizens to make their money work for them by channelling part of their savings towards investing – the best way to do this is to ensure they are better informed, get a fairer deal and are better able to meet their long-term financial objectives.”
Building on the Commission’s 2020 Capital Markets Union Action Plan, the package includes a range of actions to improve the way information is provided to retail investors about investment products and services, in ways that are more meaningful and standardised; increase transparency on costs and portfolio performance; protect retail investors from misleading marketing and undue conflicts of interests; reduce administrative burdens; and empower consumers to make better financial decisions.
However, contrary to initial plans, the Commission decided against a full ban on so-called inducements — where fund managers and insurers pay banks or other intermediaries to offer their products to clients — due to the objections from the financial industry and EU Member States, who argued such a move would be too disruptive to current business models and would have potential negative knock-on impacts on consumers.
In all, the package put forward by the Commission’s Financial Services department includes part and/or structural revisions to the EU’s entire retail investment framework, including MiFID II, AIFMD, and Solvency II.