As the financial crisis has demonstrated, the EU needs to strengthen its rules governing sales of investment products – to ensure that investors receive clearer information and better advice.
Rules have not kept pace with the increasingly complex products now on sale to ordinary investors. The Commission’s proposals aim to make sellers of investment products put their customers' interests first.
Filling the information gap
One proposal for a standard information document would require investment advisors to provide investors with certain key information for each product. The document would help investors:
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identify the key information needed to make an informed decision
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understand even complex investment products
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compare the risks and costs of different products, to help them to choose the ones best suited to them.
Buying insurance - more protection
Current rules for insurance products are not applied consistently by EU countries and aren't detailed enough to provide adequate protection. Some sales are not covered by the rules at all.
The Commission is proposing
common standards on all insurance sales, whether made through a broker or direct. The rules would guarantee consumers proper advice and information about the seller’s commission and other fees.
…and mutual funds.
Some 75 per cent of all collective investments made by small investors go to
UCITS – European mutual funds. For investor safety,
UCITS assets are held by a separate company known as a depositary, which also checks whether fund managers follow the rules.
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the duties and liabilities of depositaries
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pay policies – to ensure they don't lead to excessive risk-taking and are closely linked to investors’ long-term interests and fund objectives
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administrative penalties when UCITS, their managers or depositaries break EU law – penalties that are high enough to make breaking the law unprofitable.
Stronger rules would complement other EU measures to protect investors. These include providing access to investor compensation when things go wrong and more financial education and training.
© European Commission
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