On 19 September 2023, the European Parliament Economic and Monetary Affairs (ECON) Committee held its first exchange of views on the Retail Investment Package.
The Retail Investment Package, which was published by the European Commission (Commission) on 24 May 2023, aims to empower retail investors to take more informed investment decisions that would better correspond to their investment needs and objectives. The Commission’s proposals amend a number of legal texts in the fields of market conduct, asset management and insurance. In particular, the legislative proposals will amend the:
- Markets in Financial Instruments Directive II (MiFID II).
- Alternative Investment Fund Managers Directive (AIFMD).
- Undertakings for Collective Investment in Transferable Securities Directive (UCITS Directive).
- Directive on the provision of insurance or reinsurance distribution services to third parties (IDD).
- Directive on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II).
- Regulation on key information documents for packaged retail and insurance-based investment products (PRIIPs).
The debate in the ECON Committee was relatively short, but it provides a first indication of what the main contentious issues in the legislative review will be, and how different political groups think about the Commission’s proposals.
ECON rapporteur Stephanie Yon-Courtin (Renew, FR) started the discussion in the ECON Committee. In her speech shewelcomed the Commission’s proposals and emphasised that the initiative should improve the retail capital markets, competitiveness of EU companies and the EU’s strategic autonomy. Following her introduction, Yon-Courtin summarised her initial priorities and views. Firstly, she disagrees with the Commission’s approach towards assessing what retail investment products are suitable for retail investors as she considers that the approach is insufficiently tailored towards citizens’ needs. In her view, it is not the costs of the investment products that plays the most important role for retail investors to decide on which product to take, but also the quality of the products, especially regarding the green and social profile of the investment products. Secondly, Yon-Courtin stated that in her view, so-called finfluencers lack specific financial knowledge and might therefore sell misleading products, and that this should thus be addressed in the final text of the proposal. She is in favour of making financial businesses responsible for the content that is promoted by influencers and sanctioning them if they do not. Turning toward the topic of supervision, Yon-Courtin considers the Commission proposal not to be going far enough in improving cross-border supervision. She finished her contribution by discussing the proposed partial ban on inducements proposed by the Commission. Yon-Courtin is unsure about whether a partial ban would be effective enough. In her view, the current proposal leaves much to be desired. We understand that the draft report, which Yon-Courtin intends to publish before October 2023, will propose to delete the ban in its entirety.
Following the contribution of the rapporteur, the shadow rapporteurs from the other political groups provided their initial views on the Commission proposals. Shadow rapporteur Ralf Seekatz (EPP, DE) welcomed the fact that the Commission has taken a step back from a full inducement ban. In his view, the final text should not have a black and white approach when it comes to inducements. Instead, the approach should be to increase the number of citizens involved in retail financial markets and to increase trust in the industry. The final text should be a balancing act between new burdens for the financial sector and consumer protection. Finally, Seekatz thinks that consumers need concise information about possible retail investment products and should not be overburdened with excessive information.
Shadow rapporteur Eero Heinaluoma (S&D, FI) agreed with the other speakers that the retail investment package concerns an important proposal and that the current issues in the area of retail investments are well known. Heinaluoma thinks that the Commission proposal is a good attempt at tackling the most pressing issues. He welcomed the steps taken towards more digitalisation and information provision to retail investors. He also agreed with the stronger focus on improving financial literacy throughout the EU. On the topic of inducements, Heinaluoma argued that there should be an honest discussion on adopting a full ban on inducements instead of the partial ban proposed by the Commission. Heinaluoma hopes that a targeted discussion should lead to a swift adoption of the European Parliament position, preferably by the beginning of 2024.
Shadow rapporteur Claude Goffin (Greens, FR) stated that it is the priority of his political party that inducements are banned. Goffin based his arguments on the impact assessment conducted by the Commission, which concluded that a full ban on inducements is the best way to avoid conflicts of interest. In his view, retail investors should get unbiased advice on investment products. Goffin believes that the promotion of financial products needs to be based on how these products will benefit retail investors. Therefore, the final text should ban misleading promotions.
Finally, shadow rapporteur Marco Zanni (ID, IT) stated that there is some uncertainty on how the Commission is considering the partial ban on inducements and that he wants to see more clarity on this issue. In addition, Zanni is of the view that the proposal puts too much emphasis on lower costs for retail investors.
As mentioned above, the draft report will likely be presented before the end of September, and a possible vote in the ECON Committee would take place in the end of January 2024. As the European Parliament will cease its work in April 2024 to prepare for the June 2024 elections, it is doubtful whether the Council and European Parliament can adopt a final text of the proposals before the elections. In the Council, Member States have had initial discussions on the main issues of the legislative package. The Spanish Presidency of the Council is expected to circulate the first draft amendments in November or December.