On 21 September 2021, the European Securities and Markets Authority (ESMA) published the keynote address that Natasha Cazenave (Executive Director, ESMA) gave at the Saline del Risparmio on 17 September 2021. The keynote address is entitled Retail investors’ challenges: what investor protection safeguards should accompany increased retail participation in capital markets?

The keynote address focuses on the following areas:

• Costs and performances of investment funds. Among other things ESMA is currently coordinating a Common Supervisory Action on costs and fees in UCITS funds across Europe, to assess the compliance of supervised entities with a number of provisions in the UCITS framework, including the obligation of not charging investors undue costs. At the beginning of next year ESMA will analyse the results of Member States’ competent authorities supervisory efforts and is hopeful that this exercise can contribute to greater convergence and focus on investor outcomes.
• Distribution of retail investment products and related disclosures. In relation to digital distribution, ESMA plans to publish a call for evidence to gather information which may contribute to shape the policy advice that will be shared with the Commission and looks forward to receiving contributions and views.
• When advising the Commission on this important topic in March 2020, ESMA encouraged the Commission to conduct further analysis to assess the impact the MiFID II inducements regime has had on the distribution of retail investment products across the EU and the impact that a ban would have on different distribution models. In the meantime, ESMA has taken action on the basis of existing requirements by making clearer its position on the application of some key obligations on inducements with the objective to promote further convergence among firms and supervisors. The Commission is currently using the opportunity of the MiFID II review to make such an assessment.
• Challenges from an investor protection perspective of the growing demand for products marketed as sustainable or deemed to incorporate Environmental, Social and Governance (ESG) factors. The European Supervisory Authorities have already delivered one set of technical rules underpinning the Sustainable Finance Disclosure Regulation (SFDR) and is working on a second set of rules related to the taxonomy-specific products disclosures. A key challenge in developing the detailed product disclosures has been to attain comparability of disclosures across the very different underlying documents prescribed by the SFDR. At one extreme, the pan-European pension product, has SFDR pre-contractual sustainability disclosures in the four-five page long key information document. At the other extreme, a UCITS fund has those same disclosures in its prospectus, which can run to hundreds of pages.