30 July 2021

European Commission consultation on retail investment strategy: EBF Response

While the EBF and its members support a high level of investor protection, the EBF also highlights the need for a flexible approach in order not to disincentivize investors from investing in corporates via financial markets.

The EBF welcomes the opportunity to contribute to the retail investment strategy under the Capital Markets Union action plan. The CMU action plan is key to financing the green recovery and the digital transformation of the EU and to fostering investors’ access to capital markets (see EBF position on CMU action plan available here).

While the EBF and its members support a high level of investor protection, the EBF also highlights the need for a flexible approach in order not to disincentivize investors from investing in corporates via financial markets. At this stage, rather than issuing new rules and requirements, EBF members would support supervisory convergence between national competent authorities. EBF supports some adjustments in order to broaden the professional client category under MiFID II as the current client categorization criteria are too strict and often difficult to be satisfied, with the consequence that an excessively small portion of clients can be considered professional or professional on request.

In more detail, the EBF considers that the following key elements should be taken into consideration when developing a European Retail Investment Strategy:

• Avoid information overload and ensure that the pre-contractual information is understood by retail clients. To this end, the EBF supports a simplification of the investor protection rules in combination with measures to increase clients’ level of financial literacy.
• EU rules should be technology-neutral, i.e. work regardless of the distribution channel such as face-to-face meetings or digital communication (internet bank or apps).
• With the above principles in mind, the EBF supports a targeted alignment of MiFID, UCITS, and PRIIPs – in particular as regards pre-contractual information and rules on electronic communication per default.
• In order to ensure retail access to investment products, the EBF supports a review of the product governance requirements in MiFID II, in particular, the approach is taken for non-complex financial instruments (e.g. UCITS, ETFs, etc.). The EBF opposes a full ban on inducements as we believe that this will have negative consequences such as limiting the products that are offered to retail clients and restricting investment advice.
• Improvement of the use, alignment, and timeliness of Q&A for different legislation requirements (MAR, MiFID, UCITS, PRIIPS), thus allowing market players to achieve a deeper understanding of the applicable legislation. While ESMA’s Q&As are efficient in providing examples of particular events, to facilitate the understanding of non-legal readers such examples should be provided with proportionality assumptions.
• Make sure that any new information requirements be made subject to client/consumer testing. We would also like to underline that firms should be allowed sufficient time to implement amendments. Moreover, it is important that gold-plating of requirements at the national level be avoided.

EBF would like to highlight the importance of financial literacy. We do, in fact, believe that investment culture can only evolve with investors and entrepreneurs who are comfortable with their choices and we, therefore, need a major EU campaign for financial literacy to educate those who access capital markets. In this context, the EBF continues to support the joint EC/OECD-INFE project to develop a financial competence framework for the EU, which will play a central role in providing European investors with the knowledge needed to participate in financial markets confidently and contribute to accelerating the post-pandemic recovery.

EBF

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