09 February 2022

BEUC: Review of the markets in financial instruments regulation / MIFID II - A consumer perspective

Payment for order flow practices... is a clear conflict of interest that prevent brokers from acting in the best interest of their client and should be banned in the EU. The European Commission should also ban the payment of inducements to financial advisers .

1. Review of the Markets in Financial Instruments Regulation

On 25 November, the European Commission announced several reforms1 to Markets in
Financial Instruments Regulation (MiFIR) and MiFID II in the context of its Capital Markets
Union Action Plan2 published in 2020. BEUC welcomes the European Commission’s proposal
to ban ‘payment for order flow’ practices, which lead to conflicts of interests that can
prevent brokers from acting in the best interest of their clients.
Unfortunately, the European Commission’s legislative proposal to review MiFIR/MiFID II
currently does not address other types of conflicts of interests that harm retail investors in
the EU. Specifically, the payment of inducements to financial advisers can lead to biased
financial advice that is not in the best interest of clients and should be banned in the EU
(as already implemented in the UK and the Netherlands).
The European Commission is currently assessing how to ensure that consumers can take
effective investment decisions with sufficient confidence, as part of its Retail Investment
Strategy.3 An external study mandated by the European Commission to assess the impact
of inducement-related rules on the provision of investment advice is expected to be
published by Q1 2022.4 BEUC believes that inducements lead to biased financial advice
that is often not in the best interest of clients, and have played a key role in many recent
mis-selling scandals (see our campaign on thepriceofbadadvice.eu). We urge the
European Commission and EU policymakers, as part of this upcoming Retail Investment
Strategy, to introduce an EU-wide ban on the payment of inducements to financial
advisers.5

1 European Commission, ‘Capital Markets Union: Commission adopts package to ensure better data access and
revamped investment rules’, https://ec.europa.eu/info/publications/211125-capital-markets-union-
package_en
2 European Commission, ‘A capital Markets Union for people and businesses: New Action Plan’, https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=COM:2020:590:FIN.
3 BEUC, Consultation response to the EU Retail Investment Strategy, https://www.beuc.eu/publications/beuc-x-
2021-073_public_consultation_on_a_retail_investment_strategy_for_europe.pdf.
4 CEPS, Kantar, Milieu, ‘Disclosure, Inducements and Suitability Rules for Retail Investors Study’,
https://www.ceps.eu/ceps-projects/disclosure-inducements-and-suitability-rules-for-retail-investors-study/.
5 BEUC, ‘The case for banning commissions in financial advice’, https://www.beuc.eu/publications/beuc-x-
2019-046_the_case_for_banning_commissions.pdf

BEUC

© BEUC