On 21 March 2024, the European Parliament issued a press release stating that the Economic and Monetary Affairs Committee (ECON) had voted on new rules to help retail customers invest in quality financial products, whilst also protecting them from misleading communication and biased advice. This aims to boost citizens’ involvement in financial markets.

Key changes

On 20 March 2024, MEPs agreed on a text to amend several directives, with an overarching aim to reinforce investor protection rules. The text was adopted with 32 votes to 21 and 1 abstention.

Investment advice in the best interest of clients

In ensuring more transparent, understandable and tailored advice to clients based on an appropriate range of financial and insurance-based products, it was agreed that clients should be offered suitable products which account for account performance, level of risk, qualitative elements, costs and charges. Investment firms will no longer be allowed to accept fees, commissions, any monetary (or non-monetary) benefits provided by any third party in relation to the provision of the service when providing portfolio management or insurance-based investment products. In the case of a third-party research provider, clients would have to be informed on how the total cost of such research affects their fees.

Comparable financial products

Investors should be able to compare costs of investment products, and the cost should be subject to corrective measures where unjustified or not proportionate to the value delivered. In facilitating such comparison, the European Securities and Markets Authority and the European Insurance Occupational Pensions Authority should, after consulting Member State competent authorities (NCAs), develop common European benchmarks for products manufactured and distributed in two or more Member States, (products manufactured and distributed in one Member State should be subject to national benchmarks). As such, benchmarks should not lead to price regulation but instead be used as a supervisory tool, in assessing the monetary and non-monetary benefits of products and identifying potential outliers on the market.

Better communication

The new rules also aim to enhance the quality of financial advice, with financial advisers required to follow professional training each year (part of which should be dedicated to sustainability issues). MEPs have also advised that Member States support financial education and increase customers’ knowledge. NCAs in Member States should also take measures to prevent offering unauthorised investment services, including crypto-assets, due to the vulnerability of clients to mis-selling. Additionally, MEPs want member states to ensure that investment firms establish procedures, including electronic communication channels so that clients’ complaints are dealt with properly, within up to 30 days.

Modernisation of KID

In a separate vote, MEPs made changes to key information documents for packaged retail and insurance-based investment products. This was to ensure compatibility between PRIIP products and to develop an independent online comparison tool of the different investment options available in the EU market.

Stephanie Yon-Courtin, the lead MEP, said: “This strategy is a major step forward to complete our Capital Markets Union, especially given the massive investment gap to finance EU priorities. These new rules will enable citizens to better navigate financial markets, build on digitalisation to promote new trends while strictly framing online practices of ‘finfluencers’, give additional tools to supervisors to act more efficiently and preserve the competitiveness of our companies, especially SMEs “.

Next steps

The texts, which constitute European Parliament’s negotiating mandates, will be tabled for approval during the first plenary session in April. The file will be followed up by the new European Parliament after the 6-9 June European elections.