02 September 2023

EFAMA: EC "HAVE YOUR SAY" consultation on the EU Strategy for Retail Investors

EFAMA welcomes the publication of the RIS and commends several positive aspects... and efforts to simplify access to the "professional investor" status and tackle financial influencers. Nonetheless, we have substantial concerns ...

EFAMA welcomes the publication of the RIS and commends several positive aspects, including digital-friendly disclosures, comparable rules for MiFID/IDD products, and efforts to simplify access to the "professional investor" status and tackle financial influencers. Nonetheless, we have substantial concerns about certain sweeping proposals, and warn that their combined impact has not been thoroughly explored.
1. Pan-EU, quantitative “value for money” benchmarks that neglect that value is a subjective and holistic proposition to different investors;
These benchmarks run the risk of imposing de facto price caps, qualifying as price intervention and contravening Art. 101 of the "Treaty on the Functioning of the EU". This is also acknowledged by the recent RIS expert study commissioned by ECON (Jun 2023).
Additionally, the top-down, pan-EU benchmarks would disregard differences across national retail markets, stripping national regulators of their discretion.
Its repercussions are also alarming in terms of innovation and competition. Consequences include (a) potential price convergence at the capped level, which could lead to cost increases in some Member States; (b) a dramatic reduction in product offerings, deterring manufacturers – especially smaller ones and new entrants – from developing new products; and (c) possible outflows of investments in non-EU products especially by sophisticated investors, to accommodate investment needs.
2. An ambiguous “client’s best interest test” that, alongside the benchmarks, entails price intervention, effectively mandating which products have to be offered to investors
The proposed test, disproportionately focused on costs, may compel clients to prioritise the "cheapest" product over the ones offering greater value. We find that such an outcome to be contrary to the client’s best interest (which is not exclusively based on cost considerations)...

 

full paper

EFAMA

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