On 13 November 2024, the European Securities and Markets Authority (ESMA) published a letter that it had produced with the European Insurance and Occupational Pensions Authority (EIOPA) to various EU institutions regarding the Retail Investment Strategy (RIS).

In the letter ESMA / EIOPA note that RIS negotiations took place during political discussions intended to improve the effectiveness of the EU capital markets and therefore it is worthwhile to explore in more detail, whether and how the proposals made in this context could be integrated into the RIS at this stage. ESMA / EIOPA suggest that the European Commission (Commission) considers complementing the RIS text with proposals reflecting these ideas to prevent multiple revisions of the retail investment framework in a short period of time, which would result in inappropriately increased implementation efforts and costs.

ESMA / EIOPA also sets out its observations about the amendments to the RIS text proposed by the European Parliament and the Council in their respective positions. In particular ESMA / EIOPA express their continued support for the Commission’s proposal setting out the Value for Money Framework. They are also concerned that the effectiveness of this proposal would be significantly undermined by the additional layers of complexity and weakened provisions introduced by the co-legislators namely: (i) national benchmarks; (ii) companies’ peer grouping analysis with the peer group defined by the companies and / or with the help of a new ESMA and EIOPA database; as well as (iii) the modified nature of the benchmarks, intended to serve the sole purpose of identifying outliers in the market, without sufficiently spelling out supervisory powers in this context.

ESMA / EIOPA state that they do not believe that the introduction of national benchmarks would constitute an efficient solution aligned with the principles of the single market and they suggest a re-think of the amendments put forward by the European Parliament in this context. In addition, they add that whilst the Council’s position provides for some safeguards on national benchmarks it does not sufficiently spell out supervisory powers in cases where methodologies for national benchmarks are neither justified nor comparable. Furthermore, ESMA / EIOPA would caution against the creation of a dual system, whereby firms’ peer grouping requirements would co-exist with European supervisory benchmarks.

ESMA / EIOPA also assert that under the Council’s position, they would be expected to build a non-public database for the purposes of the peer grouping exercise. ESMA / EIOPA argue that the establishment of such a database – a tool only for a certain group of market participants – would not constitute an efficient use of their resources.