McCreevy: Regulation on retail investment products needs clear and simple principles

16 July 2008

McCreevy outlined the principles that should be applied to the wide variety of retail investment products. 'We need to ensure that these principles are respected for the full suite of retail investment products and to all distribution channels', he said.

Commissioner McCreevy outlined five guiding principles that should be applied to the wide variety of retail investment products. “We need to ensure that these principles are respected for the full suite of retail investment products and to all distribution channels” he said.  

 

The five principles include:

• Investors need clear, accurate, information, presented in a form that they can understand
• Investors need to be able to rely on distributors operating to high standards.
• Investors need to be confident that the advice given is driven by their needs and not by the profitability of the product for the distributor.
• It is critical that advertisements for financial products do not paint a misleading picture of the risks and likely performance of a product.
• The respective responsibilities of product originator and distributor need to be clear.

 

A recently undertaken Commission review identified a range of areas where financial institutions appear to be operating subject to different levels of fiduciary and transparency obligations, the Commissioner said. Among others, retail investors do not currently receive key information in a clear and accessible format. Also, questions have been raised about the robustness of EU rules for conflict of interest management and disclosure for intermediaries distributing unit linked life insurance products. Finally, certain product types, notably structured term deposits, are not currently subject to disclosure and distribution rules in European law.

 

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