Changes from report parliamentary committee draft to plenary report

RemovedEXPLANATORY STATEMENT

Added(ii) the summary risk indicator referred to in point (d)(i);

RemovedThe Rapporteur welcomes the timely Commission’s proposal for the Retail Investment Strategy, in line with one of the key Commission’s objectives of the 2020 capital markets union action plan to make the EU an even safer place for individuals to save and invest long-term.

Added(iii) the total costs of the PRIIP;

RemovedThe Commission’s proposal consists of:

Added(iv) the recommended holding period referred to in point (g)(ii);

Removed Proposal for a Directive of the European Parliament and of the Council amending Directives (EU) 2009/65/EC, 2009/138/EC, 2011/61/EU, 2014/65/EU and (EU) 2016/97 as regards the Union retail investor protection rules;

Added(v) whether the PRIIP offers the insurance benefits referred to in point (c) (iv), including whether the PRIIP offers financial guarantees;’

Removed Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 1286/2014 as regards the modernisation of the key information document.

Added(b) in paragraph 3, point (b) is replaced by the following:

RemovedThe Rapporteur considers this proposal to be one of the key proposals of this mandate. Given the time constraints, she has identified main political priorities, which she addresses in her draft report, with the aim to continue the discussions. She will further amend the proposal throughout the amendment procedure.

Added‘(b) where applicable, appropriate warnings about the specific risks of potential losses associated with particularly risky or complex financial instruments in accordance with Article 24(5c) of Directive 2014/65/EU or with particularly risky or complex insurance-based investment products in accordance with Article 29(5) of Directive (EU) 2016/97;

RemovedThe Rapporteur fully shares the objectives of this proposal. More than 70 % of EU citizens have never invested in financial products due to various reasons, whether they find it too complex or they have concerns about the risks. Therefore, we must do everything to encourage citizens to change this. The new rules to protect and empower retail investors must provide for clear and transparent information and ensure that the financial advice is in the best interest of the retail investor.

AddedIn order to facilitate consultation and comparison of data, ESMA and EIOPA, in cooperation with NCAs, shall develop an independent online comparison tool for packaged retail and insurance-based investment products. That tool shall at least include information related to the performance, risk level, recommended holding period and the cost and fees of a PRIIP, and mention its qualitative features.

Removed Inducements

AddedThe comparison tool shall be developed using the key information document data provided by the European Single Access Point as established by Regulation (EU) xxxx/xxxx (ESAP). In developing the independent online comparison tool, ESMA and EIOPA shall carry out consumer testing.

RemovedThe Rapporteur expressed strong views against a full ban on inducements. She remains concerned about the introduction of a partial ban on executive-only services which is not justified and does not seem to address issues of conflict of interest. This looks more like it is a first step towards a full ban. Many consumers in the EU rely on the advice of financial advisors and therefore it is necessary to enhance the current framework with appropriate tools and improvements. She believes that the conflicts of interest can be addressed via increased transparency. Moreover, the Rapporteur is of the opinion that the timing and the content of the review clause is unsatisfactory. This review clause shall not be biased as to lead to the automatic introduction of a full inducement ban. Therefore, she proposes to prolong it to 5 years starting from the end of the transposition period of the directive, to allow seeing the real effects of the measures on the market. Furthermore, she suggests broadening the review clause’s scope to provide for an assessment based on potential conflicts of interest, evolution of costs, level of retail investment in capital markets, consumer protection and the relevance of distribution rules.

AddedThe independent comparison tool shall be available at the latest 12 months after key information documents are available on the European Single Access Point. A link to the independent online comparator, once available, shall be added to the key information document. Management companies, investment firms and insurance intermediaries shall promote the use of the online comparison tool on their websites, including in relevant marketing material.’;

Removed Best interest test

Added(c) in paragraph 3, point (c), point (ii) is replaced by the following:

RemovedIn her draft report, the Rapporteur clarifies and strengthens the Commission’s proposal on the ‘best interest’ test under Markets in Financial Instruments Directive (MiFID) and Insurance Distribution Directive (IDD). In MiFID, she proposes to clarify the notion of ‘cost-efficiency’. In IDD, rather than focusing on the cost-efficiency of a product, she suggests that financial advice shall be given based on the performance, level of risk, costs, charges of an insurance based investment product or, where applicable underlying investment options. The products that are offered to the consumers must be tailored to their specific needs and objectives, thus it is not only the price that matters, but equally so the quality of the product.

Added“(ii) the PRIIP’s financial objectives and the means for achieving those objectives, and in particular whether those objectives will be achieved by means of direct or indirect exposure to the underlying investment assets, including all of the following information:

Removed Value for Money benchmarks

Added(1) a description of the underlying investment assets or reference values;

RemovedIn the Rapporteur’s view, the Commission’s proposal on value for money could be disruptive on the market, as it would lead to reduced diversity of products and supressed innovation. She believes that the lack of clarification regarding the methodology applied to design those benchmarks prevents us to assess how these would truly unfold in practice. The Rapporteur fully agrees with the principle that the product must deliver value for money and that the products with unjustified and disproportionate high costs and charges have no place on the market. However, further discussions are needed on this point in order to find the right and balanced approach. Hence, the Rapporteur in her draft report deletes the benchmarks, with a view to continue discussions on this topic.

Added(2) a specification of the markets the PRIIP invests in;

Removed Supervision and cross-border practices

Added(3) information about how the return is determined;’;

RemovedThe Commission’s proposal does not go far enough in this respect and therefore the Rapporteur proposes amendments in pursuance of boosting the cross-border supervision and ensuring the equal protection for all consumers in all EU Member States. In this spirit, the Rapporteur introduces an obligation for companies to register in the same Member State where their head office is located, in order to avoid forum-shopping.

Added(ca) in paragraph 3, the following points are inserted:

Removed Finfluencers

Added‘(ca) for PRIIPs in respect of which financial market participants are to disclose pre-contractual information pursuant to Article 8 and 9 of Regulations (EU) 2019/2088 of the European Parliament and of the Council, under a section titled ‘How environmentally sustainable is this product?’, the following information:

RemovedDigitalization has created a new generation of investors. We see the emergence of so-called “finfluencers” operating on social media and mobilizing mainly younger generations. The Rapporteur welcomes the measures proposed by the Commission to ensure clear, fair and no misleading marketing communications and to address concerns when it comes to financial influencers. They often lack specific knowledge in the area. Therefore the Rapporteur proposes additional elements to strengthen this part of the proposal even further, for example, by imposing the firms to sign a contract with the finfluencers in order to ensure transparency and determine responsibility. She also suggests to extend the provision regarding the ‘procedure to address unauthorised activities offered through digital means’, to finfluencers using miss-selling practices.

Added(i) the minimum proportion of the investment of the PRIIP that is associated with economic activities that qualify as environmentally sustainable in accordance with Articles 5 and 6 of Regulation (EU) 2020/852 of the European Parliament and of the Council;

Removed Financial literacy

Added(ii) the greenhouse gas emissions intensity associated with the PRIIP pursuant to Delegated Regulation (EU) 2022/1288, if applicable to the product;’

RemovedThe Rapporteur perceives financial literacy as a vital element of improving investment behaviour in the EU, not only for consumers but also for financial advisors in order to provide high-quality professional advice. According to the recent Eurobarometer survey, only 18 % of EU citizens have a high level of financial literacy, 64 % have a medium level and 18 % a low level, while there are also huge divergences among Member States. These numbers clearly show that much more needs to be done in this field and that the EU must fully use its role to urge Member States to be ambitious in this regard.

Added(iii) whether, in relation to the PRIIP, the PRIIP manufacturer has considered the principal adverse impacts of the investment decision on sustainability factors pursuant to Regulation (EU) 2019/2088;

Removed Data providers

Added(cb) for products covered by Article 8 or 9 of Regulation (EU) 2019/2088, a link to relevant additional disclosure information provided under Article 10(1)(c) of Regulation (EU) 2019/2088;’;

RemovedFinancial and non-financial market data are essential to the correct functioning of financial markets and to the provision of quality investment services to clients. These data must be of high quality, reliable, subject to very strict control procedures and accessible at fair conditions. The access, use and cost of financial and non-financial market data necessary to provide investment services and to manufacture and distribute financial products are an important portion of the costs borne by investment firms, representing therefore a significant proportion of the total charges paid by retail clients. That is why the Rapporteur is of the view that the EU should implement horizontal and holistic European regulation for both financial and non-financial data providers and their activities, which should be accompanied by increased supervision of all data providers (including the third-country providers who currently benefit from an oligopolistic situation) at the European level.

Added(cb) in paragraph 3, point (d), point (iii) is amended as follows:

Removed Packaged retail and insurance-based investment products (PRIIPS)

Added“(iii) appropriate information on performance and the assumptions made to produce it. Where information on future performance is provided, it shall be based on performance scenarios;”;

RemovedThe Rapporteur welcomes the Commission’s proposal on PRIIPS but sees the need to introduce further adjustments to market practices and certain adaptations to the insurance sector. She suggests erasing a new section in the Key Information Document titled ‘Product at a glance’ and will continue to further assess the alignment of the new sustainability section with the relevant existing legislation.

Added(d) ▌

Added(e) Paragraph 4 is deleted.

Added(ea) in paragraph 5, the first and second suparagraphs are replaced by the following:

Added“In order to ensure consistent application of this Article, after conducting consumer testing, the ESAs shall, through the Joint Committee of the European Supervisory Authorities (‘Joint Committee’), develop draft regulatory technical standards specifying:

Added(a) the details of the presentation and the content of each of the elements of information referred to in paragraph 3;

Added(b) the methodology underpinning the presentation of risk and reward as referred to in points (d) (i) and (iii) of paragraph 3; and

Added(c) the methodology for the calculation of costs, including the specification of summary indicators, as referred to in point (f) of paragraph 3.

AddedWhen developing the draft regulatory technical standards, the ESAs shall take into account the various types of PRIIPs, the differences between them and the capabilities of retail investors as well as the features of the PRIIPs so as to allow the retail investor to select between different underlying investments or other options provided for by the product, including where this selection can be undertaken at different points in time, or changed in the future. Where appropriate, in order to provide fair, clear and non-misleading information to retail investors, different approaches should be taken for different types (i.e., groups or categories) of products.

AddedIn relation to the presentation and content of the information referred to in paragraph 3, point (ca), the ESAs shall take into account the financial product disclosures made in accordance with Regulation (EU) 2019/2088 and Delegated Regulation (EU) 2022/1288. Alignment with the present Regulation shall be ensured to the extent needed in order to meet the KIDs' objectives and preserve the readability of the information to potential retail investors.

Added(f) In paragraph 5, the third subparagraph is replaced by the following:

Added“The ESAs shall submit those draft regulatory technical standards to the Commission by … [PO please insert the date= one year after the date of entry into force of this amending Regulation].”

Added_______________

Added** Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector (OJ L 317, 9.12.2019, p. 1).

Added*** Commission Delegated Regulation (EU) 2022/1288 of 6 April 2022 supplementing Regulation (EU) 2019/2088 of the European Parliament and of the Council with regard to regulatory technical standards specifying the details of the content and presentation of the information in relation to the principle of ‘do no significant harm’, specifying the content, methodologies and presentation of information in relation to sustainability indicators and adverse sustainability impacts, and the content and presentation of the information in relation to the promotion of environmental or social characteristics and sustainable investment objectives in pre-contractual documents, on websites and in periodic reports (OJ L 196, 25.7.2022, p. 1).

Added****Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, p. 13).’;