The European Commission’s proposal for a Retail Investment Strategy is currently being debated within the European Parliament and Council. As a contribution to this discussion, EFAMA have produced a short leaflet which summarises the needs of EU retail investors, what the proposal gets right, and alternative proposals to consider, with a special focus on disclosures and advice.
Our key suggestions include:
- Remove quantitative ‘value-for-money’ benchmarks, which go too far towards market price setting, and instead introduce quantitative and qualitative value assessments across the whole value chain (including product manufacturers and distributors), overseen by national supervisors and building on the already existing MiFID requirements.
- Remove the ‘best interest’ test, which overlaps with existing MiFID suitability rules, and instead maintain the existing quality enhancement test and extend it to cover insurance products.
- Instead of banning commissions on execution-only trades, which could limit access to digital trading platforms that rely on these in their business model, rather apply the quality enhancement test to these trades, to ensure that commissions are improving investor services.
- Avoid adding potentially unclear or repetitive dashboards to investor disclosure documents such as the PRIIPs KID.
- Instead of limiting the ‘suitability-light’ regime to independent advisors, rather apply it to highly regulated and relatively safe investment products like UCITS, regardless of the distributor the investor has chosen.
- Set a dynamic implementation deadline for 18 months after essential technical standards are developed by ESMA, to ensure a clear and smooth implementation.