The Commission today adopted a retail investment package which puts the interests of consumers at the heart of retail investment. The aim is to empower retail investors (i.e. non-professional ‘consumer’ investors) to make investment decisions aligned with their needs and preferences, ensuring that they are treated fairly and adequately protected. This will boost the confidence and self-confidence of private investors to invest safely in the future and take full advantage of the EU Capital Markets Union.

One of the Commission’s three main objectives in the 2020 action plan for the Capital Markets Union was to consolidate the EU as an even safer place for private investment in the long term. Today’s package aims to achieve this and encourage participation in EU capital markets, which is traditionally lower than in other jurisdictions such as the United States, even though Europeans’ savings rates are very high. Stimulating the Capital Markets Union is also a key means of channeling private finance into our economy and funding the green and digital transition.

The package in detail

The package includes ambitious and wide-ranging measures with the following objectives:

Improving the way retail investors are provided with information about investment products and services in more meaningful and standardized ways, adapting disclosure rules to the digital age and the ever-increasing investor preference for sustainable investments.

Increase transparency and comparability of costs, by mandating the use of standardized cost presentation and terminology. This ensures that the investment products really offer good value for money to retail investors.

Ensuring that all retail clients receive at least annually a clear picture of their portfolio’s investment performance.

Addressing potential conflicts of interest in the distribution of investment products by prohibiting consideration for sales that are limited to the execution of a client’s order (i.e. when no advice is provided) and ensuring that financial advice is aligned with the best interests of retail investors. Tighter safeguards and transparency will also be introduced when kickbacks are allowed.

Protecting retail investors from misleading marketing by providing that financial intermediaries (i.e. advisers) are fully responsible for the use (and misuse) of their advertising, including when it is done on social media or through celebrities or other third parties to whom they offer remuneration or other incentives.

Maintaining high professional standards for financial advisers.

Empowering consumers to make better financial decisions by encouraging Member States to put in place national measures in favor of the financial literacy of citizens, regardless of their age or social and educational background.

Reducing the administrative burden and improving the accessibility of products and services for qualified private investors by making the eligibility criteria to become a professional investor more proportionate.

Strengthening supervisory cooperation to make it easier for national competent authorities and European Supervisory Authorities to ensure the correct and effective application of rules in a coherent way across the EU and to jointly fight fraud and unfair practices.

The current package of measures has a wide scope and concerns the entire investment journey of the consumer. It consists of an amending directive, revising the current rules set out in the Markets in Financial Instruments Directive (MiFID II), the Insurance Distribution Directive (IDD), the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive , the Directive on Managers of Alternative Investment Funds (AIFM) and the Directive on the Undertaking and Pursuit of Insurance and Reinsurance Businesses (Solvency II), as well as an amending Regulation, which revises the Regulation on packaged investment products for retail investors and insurance-based investment products (PRIIPs).

Investor protection rules are currently set out in sectoral legislation, including MiFID, the PRIIPs Regulation, the UCITS Directive, the UCITS Directive, the Solvency II Directive and the IDD Directive. These rules can differ from one financial instrument to another, and sometimes even conflict with each other, which creates confusion as to the cumulative requirements for retail investors. At the same time, digitization has brought changes to distribution models and created new forms of marketing financial instruments to private clients.

Over the past three years, the Commission has gathered evidence on the basis of today’s proposals in a number of ways, including an in-depth study examining key issues concerning retail investors (disclosures, advice, compensation, suitability), extensive public consultation processes , requests for advice from the European Supervisory Authorities and numerous contacts with interested parties.