The European Securities and Markets Authority (ESMA) has published the statement that its chairman, Steven Maijoor, delivered to the European Parliament’s Economic and Monetary Affairs Committee (ECON). ESMA has also published Mr. Maijoor’s statement to ECON given in his capacity as the current chair of the joint committee of the European Supervisory Authorities (ESAs).
In his statement to ECON as ESMA’s chair Mr. Maijoor discusses the ESA’s recent single rulebook activity noting that it has published the results of, and is working on, a range of peer reviews covering such topics such as high frequency trading, the prospectus approval process, and fair, clear and not misleading information.
Mr. Maijoor also mentions in his statement that in line with its Strategic Orientation 2016-2020, ESMA’s focus is shifting to implementation – it will be allocating more resources to supervisory convergence activities and will reduce them for single rulebook activities. He states, “there is substantial room for greater convergence, and the goal, which will underpin our future work in this area is to increase support for convergent practices upfront, at the time when rules are being implemented and to rely less on ex post reviews which often imply remedial work. In short, this means a shift to a more proactive approach to applying the new single rulebook consistently.”
In his statement as chair of the joint committee of the ESA’s Mr. Maijoor updates ECON on the work being done on the regulatory technical standards (RTS) under the Regulation on Packaged Retail and Insurance-based Investment Products (PRIIPs). In his statement Mr. Maijoor mentions that a consultation paper on the draft RTS will be published in November.
In the final part of his statement Mr. Maijoor makes a few remarks concerning the disclosures on the potential return of a PRIIP. He states that “we have been considering several options for the disclosure of this information: so-called ‘what-if’ scenarios, a probabilistic approach, or a combination of the two. Under the first option, product providers would describe how the product would perform under different market conditions, but no information would be given on the likelihood of each scenario. The second option would consist of defining the scenarios disclosed in the KID [key information document] according to the likelihood of the possible returns. Under this approach the probabilities themselves may or may not be disclosed in the KID. The ongoing consumer testing suggests that there can be real challenges for retail investors in understanding the probability information. Simpler information, again, is probably better.”
View ESMA Chair’s statements to the ECON Committee at the European Parliament, 14 September 2015