Regulation Tomorrow I European Parliament ECON Committee debate on Retail Investment package draft report

The Retail Investment package, which was published by the 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 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). 

Yon-Courtin started the discussion by presenting her draft report. She told the ECON Committee that her priority is to ensure that retail investments are more attractive and safer for EU citizens. Although she announced that she will propose further changes in the coming days, she presented the main amendments in her draft report. On the proposed ban on inducements, Yon-Courtin is in favour of scrapping the ban in its entirety as she is of the view that a full or partial ban will not be beneficial for retail investors. Instead, she proposes to better frame the rules and obligations on the provision of financial advice. Yon-Courtin also stated that she thinks that the proposed best interest test is a good idea, but that the Commission proposal does not implement the idea in the right manner as it focuses too much on costs. She would like to amend the Commission proposal by refocusing the test on other aspects that are important to retail investors, such as the sustainability characteristics of a product. This would ensure that investors are more aware of the quality of their investments. Yon-Courtin also proposed to scrap the proposed Value for Money benchmark in its entirety and start from scratch to develop a better benchmark, as the Commission proposal could be disruptive to be market, as it would lead to reduced diversity of products and supressed innovation. Other measures discussed in Yon-Courtin’s intervention were her wish to strengthen supervision by introducing measures that would restrict forum shopping by regulated entities and to regulate financial promotions made by so-called finfluencers. Finally, the rapporteur will introduce new amendments that would further align the sustainability provisions in PRIIPs with those in other pieces of financial services regulation.  

 After the rapporteur’s intervention shadow rapporteur Ralf Seekatz (EPP, DE) took the floor. Seekatz thinks that both the Commission proposals and the draft report contain good proposals, but that there are still a large number of technical details that need to be looked at in the coming weeks. Seekatz is in favour of removing the ban on inducements and therefore supports the rapporteur’s proposed amendment on this issue. Instead, he hopes to find a pragmatic approach that would help consumers. On the best interest test, he thinks that cost considerations are a good focus but that consumers may still receive more expansive recommendations in terms of which products to invest in, based on other parameters. Finally, Seekatz thinks that the Value for Money benchmark as proposed by the Commission is too invasive and may turn into an implicit price control, and therefore calls upon  colleagues to consider alternative models. 

Shadow rapporteur Eero Heinaluoma (S&D, FI) thinks that the rapporteur’s draft report falls short of his group’s expectations. In his view, the proposed amendments will not bring more trust for retail investors. The S&D group remains in favour of a ban on inducements as it is the most effective solution to address potential and actual conflicts of interest. In addition, Heinaluoma would like to have a stronger best interest test and a proper Value for Money benchmark. 

 Shadow rapporteur Claude Goffin (Greens, FR) emphasised that the focus of the retail investment package must be on citizens who want to participate in the capital markets. The Greens are in favour of a ban on inducements and thinks that the position taken by the rapporteur is a step in the wrong direction. Goffin also proposes to ensure there is consideration of sustainability factors in the set-up of the Value for Money benchmark. 

Finally, shadow rapporteur Marco Zanni (ID, IT) is of the view that the draft report is largely in line with the views of the ID group. In his view, the rapporteur’s approach improves the text presented by the Commission with regard to the ban on inducements, and Value for Money Benchmark. Zanni thinks that the Value for Money benchmark should be eliminated.  

Next steps 

The deadline for the shadow rapporteurs and other members of the ECON Committee to submit amendments to the Commission proposals is 26 October 2023. The shadow amendments will then be discussed on 28 November 2024, and the ECON Committee is planning to vote on its negotiating position on 23 January 2024. Taking this timeline into account, it is likely that no final text of the Commission proposals can be adopted before the European Parliament elections in June 2024.