The European Commission recently proposed a package of measures to protect retail investors that will have a significant impact on the design and marketing strategies for financial products aimed at retail investors. In particular, they will prohibit inducements for execution services and the reception/transmission of orders and costs charged to UCITS and AIFs that target retail investors. They will also prohibit the use of third parties to promote products (“finfluencers”).
In May this year, the European Commission presented a package of measures to strengthen the protection of retail (non-professional) investors. The package consists of a proposal for a directive and a regulation to amend several existing directives in the financial sector. The directives to be amended are the UCITS Directive, AIFMD, MiFID, Solvency II and DDS. The proposed regulation would amend the rules on PRIIPs and, in particular, the KID.
The European Commission’s main objectives are to:
One important highlight is the proposal to extend the ban on inducements for execution services and reception/transmission of orders. If adopted, this proposal will have a significant impact on the marketing structures of financial products and is likely to require a rethink of current marketing and network arrangements.
PRIIPs Regulation.The proposed change to the KID is in line with the European Supervisory Authorities’ technical opinion of May 2022, which proposed several changes to the format of this document, and it is now due for major changes.
The Omnibus Directive. The main changes proposed by the Commission focus on the following issues:
The package presented by the European Commission is now expected to continue its legislative process at the level of the Council and the European Parliament.