The European Federation of investors and Financial Services Users fully supports the clear stated objectives of the European Union’s very welcome “Retail Investor Strategy”.
ENSURE A LEVEL PLAYING FIELD IN SECTORAL LEGISLATION
The European Commission’s stated goal for the EU Strategy for Retail Investors (RIS) is to: ”ensure that (…) rules are coherent across legal instruments”.
Article 38 of the EU Charter of
Fundamental Rights requires a high standard of consumer protection to be
ensured across all Union policies. Unfortunately, EU rules are too
often inconsistent between one category of “retail” investment products
and another.
BETTER FINANCE proposes to adopt a
uniform approach to both MiFID II, MiFIR, IDD, PEPP, IORP, MICAR etc.,
to ensure that individual, non-professional investors benefit of the
same level of protection when buying packaged investment products,
regardless of the type.
Such a legislative work would ensure a
higher standard of investor protection, stimulate cross-border
distribution of services and products, reduce regulatory arbitrage,
increase legal certainty, clarity of the legal framework and,
ultimately, trust in investment services.
A common body of investor protection
rights would be key to achieve this objective and build towards a
Capital Markets Union “that works for People”.
CLOSE THE UNBIASED ADVICE GAP FOR RETAIL INVESTORS
The EC’s stated goal for the RIS is also to ensure that “an individual investor should benefit from (…) bias-free advice”.
EU citizens must trust that investment
professionals act honestly, fairly, and professionally in accordance
with their best interests. This requires the elimination of biases in
investment services and closing the advice gap in the EU.
Currently, the EU market for “retail”
investments faces a huge shortage of advice for non-professional savers.
This is because the dominant distribution model (of retail investment
products) is commission-based, meaning that product manufacturers pay distributors to influence what to sell to their clients.
EU law should end this confusion
between selling and independent advice: at the very least, investment
firms should not receive and retain third-party remunerations for
providing independent advice, portfolio management, and execution-only
services to retail clients. Currently, only MiFID II lays down such a
prohibition (except for execution-only, Art. 24(7) and (9) MiFID II) and
it should be extended for all retail investment sectors (IDD, PEPP,
MiCAR, etc.)....
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