Changes from report parliamentary committee draft to plenary report

Added(c) the investment firm assesses, on an annual basis, the quality, usability and value of the research used, as well as the ability of the research used to contribute to better investment decisions; ESMA may develop guidelines for investment firms for the purpose of conducting those assessments.

AddedFor the purpose of this Article, research shall be understood as covering research material or services concerning one or several financial instruments or other assets, or the issuers or potential issuers of financial instruments, or as covering research material or services closely related to a specific industry or market such that it informs views on financial instruments, assets or issuers within that industry or market.

AddedResearch shall also comprise material or services that explicitly or implicitly recommend or suggest an investment strategy and provide a substantiated opinion as to the present or future value or price of financial instruments or assets, or otherwise contain analysis and original insights and reach conclusions based on new or existing information that could be used to inform an investment strategy and be relevant and capable of adding value to the investment firm’s decisions on behalf of clients being charged for that research.

Added7. Where the investment firm is not prohibited from getting or paying fees or benefits, from or to a third-party, in connection with services provided to its clients, it shall ensure that the reception or payment of such fees or benefits does not impair compliance with the investment firm’s duty to act honestly, fairly and professionally in accordance with the best interest of its clients. The existence, nature and amount of such third-party payment(s) shall be disclosed in accordance with Article 24b(1).

AddedWhere applicable, the investment firm shall also inform the client on mechanisms for transferring to the client the fee, commission, monetary or non-monetary benefit received in relation to the provision of the investment or ancillary service.

AddedThe payment or benefit which enables or is necessary for the provision of investment services, such as custody costs, settlement and exchange fees, regulatory levies or legal fees, and which by its nature cannot give rise to conflicts with the investment firm’s duties to act honestly, fairly and professionally in accordance with the best interests of its clients, is not subject to the requirements set out in the first subparagraph.

Added▌

AddedInformation on costs, associated charges and third-party payments

Added1. Member States shall ensure that investment firms provide clients or potential clients in good time prior to the provision of any investment services and ancillary services, and in good time prior to the conclusion of any transaction on financial instruments with information, in the required format, on all costs, associated charges and third-party payments related to those services, financial instruments or transactions.

AddedInformation about costs and charges which are not caused by the occurrence of underlying market risk shall be aggregated. Investment firms shall explicitly inform their clients of their right to request the provision of an itemised breakdown and shall provide such an itemised breakdown at the request of the client. The information on those costs, associated charges and third-party payments shall include all of the following:

Added(a) all explicit and implicit, and associated charges, including all costs and charges relating to the distribution of the financial instrument, and the cost of advice, where relevant, charged by the investment firms or other parties where the client has been directed to such other parties, for the investment services and/or ancillary services provided to the client or potential client;

Added(b) all costs and associated charges associated with the manufacturing and managing of any financial instrument recommended or marketed to the client or potential client;

Added(c) any third-party payments paid or received by the firm in connection with the investment services provided to the client or potential client;

Added(d) options on how the client may pay for them.

AddedMember States shall ensure that investment firms aggregate the information on all costs and associated charges to enable the retail client to understand the overall cost, of the financial instruments▌. For retail clients, Member States shall ensure that investment firms express the overall cost in monetary terms and percentages calculated ▌over the following periods:

Added- for financial instruments which are packaged retail investment products, over the holding period recommended by the investment firm,

Added- for other financial instruments, up to the maturity date of the financial instrument;

Added- for financial instruments without a maturity date, and which are not packaged retail investment products, over a holding period of one year.

AddedThe information referred to in the second subparagraph, points (a) to (c), shall be accompanied by an appropriate explanation, in a standard and comprehensible language for a retail client, on the impact of the costs, charges and any third-party payments on the expected return.

AddedThe third-party payments paid or received by the investment firm in connection with the investment service provided to the client shall be itemised separately. The investment firm shall disclose the cumulative impact of such third-party payments, including any recurring third-party payments, on the net return over the holding period as mentioned in the preceding subparagraph. The purpose of the third-party payments and their impact on the net return shall be explained in a standardised way and in a comprehensible language for a retail client.

AddedWhere the amount of ▌third-party payments cannot be ascertained prior to the provision of the relevant investment or ancillary service, the method of calculating the amount shall be clearly disclosed to the retail client in a manner that is comprehensible, accurate and understandable for a retail client. The firm shall also provide its clients with information on the exact amount of the third-party payments received or paid on an ex-post basis.

Added2. ESMA shall, after having consulted EIOPA and after conducting consumer and industry testing ▌develop draft regulatory technical standards to specify all of the following:

Added(a) the relevant format for the provision of any costs, associated charges and third-party payments, by the investment firm to its retail client or potential retail client, prior to the provision of any investment services, ancillary services, and the conclusion of any transaction on financial instruments;

Added(b) the standard terminology and brief and consise related explanations to be used by investment firms for the disclosure and calculation of any costs, associated charges and third-party payments charged directly or indirectly by firms to the retail client or potential retail client in connection with the provision of any investment service(s) or ancillary service(s) and the manufacturing and managing of financial instruments to be recommended or marketed to the retail client or potential retail client. The explanations ▌shall ensure that they are likely to be understood by any▌ retail client without specific knowledge on ▌financial instruments.

AddedESMA shall submit those draft regulatory technical standards to the Commission by [OJ: 18 months after the date of entry into force].

AddedPower is delegated to the Commission to adopt those regulatory technical standards in accordance with Article 10 of Regulation. (EU) No 1095/2010.

Added3. Where the agreement to buy or sell a financial instrument is concluded using a means of distance communication which prevents the prior delivery of the information on costs,▌ charges and third-party payments, the investment firm may provide the information on costs,▌ charges and third-party payments either in electronic format or on paper, where requested by a retail client, without undue delay after the conclusion of the transaction, provided that the following conditions are met:

Added(a) the client has consented to receiving the information without undue delay after the conclusion of the transaction;

Added(b) the investment firm has given the client the option of delaying the conclusion of the transaction until the client has received the information.

AddedThe investment firm shall be required to give the client the option of receiving the information on costs and charges over the phone prior to the conclusion of the transaction.

Added4. Without prejudice to other requirements associated to portfolio management services, when providing any investment service to a retail client together with a service of safekeeping and administration of financial instruments for the account of the retail client, the investment firm shall, in connection with those instruments, provide its retail client with an annual statement with the following information expressed in monetary terms and percentages:

Added(a) all implicit and explicit costs and associated charges paid or borne annually by the retail client for the total portfolio, with a split between:

Added(i) the costs associated with the provision of any investment or ancillary service, as applicable, by the investment firm to the retail client;

Added(ii) the costs associated to the manufacturing and managing of the financial instruments held by the retail client;

Added(iii) if any, the payments received by the firm from, or paid to, third parties in connection with the investment services provided to the retail client;

Added(b) the total amount of dividends, interest and other payments received annually by the retail client for the total portfolio;

Added(c) the total taxes, ▌borne by the retail client for the total portfolio;

Added(d) the annual market value, or estimated value, when the market value is not available, of each financial instrument included in the retail client’s portfolio;

Added(e) the net annual performance of the portfolio of the retail client and, upon request, the annual performance of each of the financial instruments included in this portfolio.

AddedWhere providing an investment service without a service of safekeeping and administration of financial instruments for the account of the retail client, the investment firm shall provide an annual statement including applicable information on point (a).

AddedWhere providing exclusively a service of safekeeping and administration of financial instruments for the account of the retail client, the investment firm shall provide an annual statement including applicable information on point (a), (b), (c) and (d).

AddedInvestment firms shall inform retail clients explicitly about the possibility to ask for a detailed breakdown of the information referred to under point (a) to (c) above per financial instrument owned during the relevant period and shall provide such an itemised breakdown at the request of the client. When several investment firms need to provide an annual statement to the client, it is sufficient to provide one statement that contains all the information foreseen in the second and third subparagraph.

AddedWithout prejudice to the requirement in this paragraph, where sufficient information is not available on a specific product to draw up an annual statement, the requirements with respect to the annual statement shall only be applicable to contracts concluded after the entry into force of Directive ... / .... [insert the number of this amending Directive].

AddedThe annual statement on costs and performance for retail clients shall be presented in an easy-to-understand way for an average retail client. Information on costs, associated charges and any third-party payments shall be presented using the terminology and explanations and the calculation methodology specified in the regulatory technical standards referred to in paragraph 2 of this Article.

Added5. Upon request by the retail client, it shall not be necessary to provide the annual statement referred to in paragraph 4 if the investment firm provides its retail clients with access to an online system, which qualifies as a durable medium, where up-to-date statements with the relevant disclosure per instrument as required under paragraph 4 can be easily accessed by the retail client and the firm has evidence that the client has accessed those statements at least once per year.

AddedMarketing Communications and Practices

Added1. Member States shall ensure that marketing communications are clearly identifiable as such and clearly identify the investment firms responsible for their content and distribution, regardless of whether the communication is made directly or indirectly by the investment firm.

Added2. Member States shall ensure that marketing communications are developed, designed and provided in a manner that is fair, clear, not misleading, balanced in terms of presentation of benefits and risks, and appropriate in terms of content and distribution channels for the target market clients and where related to a specific financial instrument to the target market identified pursuant to Article 24(2).

AddedAll marketing communications shall present in a prominent and concise way, the essential characteristics of the financial instruments or the investment services and related ancillary services to which they refer.

AddedThe information shall be made accessible, depending on the characteristics of the medium, via a nested display, scroll over, through QR-code, or similar.

AddedThe presentation of the essential characteristics of the financial instruments and services made available in the marketing communications provided or made accessible to retail or potential retail clients, shall ensure that they can easily understand the key features of the financial instruments or services as well as the costs and main risks associated with them.

Added3. Member States shall ensure that marketing practices are developed and used in a manner that is fair and not misleading, and shall be appropriate for the target market. Member States shall ensure that investment firms carrying out profiling of individuals for the purpose of this paragraph, fully comply with Regulation (EU) 2016/679.

Added4. Where a manufacturer of a financial instrument prepares and provides a marketing communication to be used by a distributor, the manufacturer shall be responsible for the content of such marketing communication and its update. The distributor shall be responsible for the use of this marketing communication and shall ensure that it is used for the identified target market only and in line with the distribution strategy identified for the target market.

AddedWhere an investment firm that offers or recommends financial instruments which it does not manufacture, organises its own marketing communication, it shall be fully responsible for its appropriate content, update and use, in line with the identified target market and in particular in line with the identified client categorisation.

Added4a. Where an investment firm uses the services of a finfluencer, that investment firm shall:

Added(a) establish a written agreement with the finfluencer determining the nature and scope of the activity to be carried out on behalf of the firm;

Added(b) upon request, provide the competent authority with the identity and contact details of the finfluencer on whose services it relies to the competent authority;

Added(c) regularly verify whether the activity of the finfluencer whose services it relies on complies with paragraphs 1 to 4.

Added5. Member States shall ensure, that investment firms make annual reports to the firm’s management body on the use of marketing communications and strategies aimed at marketing practices, the compliance with relevant obligations on marketing communications and practices under this Directive and on any signalled irregularities and proposed solutions.

Added6. Member States shall ensure that national competent authorities can take timely and effective action in relation to any marketing communication disseminated in their territory or marketing practice taking place in their territory that do not comply with requirements laid down in paragraphs 1 to 3.