The European Securities and Markets Authority (ESMA) has published a speech given by its chairman, Steven Maijoor. The speech is entitled The ESAs’ role in financial consumer protection.
In his speech Mr Maijoor covers Packaged Retail and Insurance-based Investment Products (PRIIPs) and MiFID II / MiFIR.
In relation to PRIIPs Mr Maijoor mentions that each of the three European Supervisory Authorities (ESAs) will next month publish a discussion paper outlining the format and content of the Key Information Document. This will not be the only opportunity in which stakeholders will be given a chance to comment. There will be at least two further consultation rounds between now and the end of 2015. The feedback from this process will be complemented by the results of a consumer testing exercise that the European Commission, together with the ESAs, will launch very soon.
On MiFID II / MiFIR Mr Maijoor focuses on the role of inducements when advising on financial instruments. Mr Maijoor notes that the ESMA consultation paper in this area is based on the principle that portfolio managers should not choose their brokers on the basis of the research received from them. ESMA has proposed that in order to be considered as a minor non-monetary benefit, research should be intended for distribution so that it is accessible by a large number of persons (or by the public) at the same time. Also in the consultation paper, ESMA has consulted on introducing a non-exhaustive list of circumstances and situations in which quality enhancement is not met and a fee, commission or non-monetary benefit may not be regarded as designed to enhance the quality of the service to the client.
Mr Maijoor explains that ESMA is currently reading all the responses to the consultation carefully and will take them into account when taking a final decision on the technical advice in December 2014. Without prejudice to this final decision, Mr Maijoor makes the following three remarks:
- ESMA does not have any intention to extend the ban on inducements beyond the situations in which are foreseen in the Level 1 text. That is to say: when portfolio management and investment advice on an independent basis are provided. At the same time ESMA will recall that the Level 1 text is clear in requiring that, in all other circumstances, the inducement “is designed to enhance the quality of the relevant service to the client”;
- a main concern has been expressed that ESMA’s proposed advice might reduce retail consumers’ access to advice. As a regulator with investor protection as one of its main objectives, ESMA supports the need for good advice for retail consumers but it does not support advice which is distorted by inducements; and
- in the area of research, a concern expressed is that ESMA’s proposal would reduce the amount and scope of research conducted. Mr Maijoor notes that as a regulator ESMA fully sees the importance of high quality research for well-functioning financial markets. Hence, a solution is needed to ensure compliance with the legal requirements whilst avoiding affecting availability and coverage of research.
View Steven Maijoor delivers keynote speech at CNMV Conference La Nueva Financiera Regulacion in Madrid, 15 October 2014