Changes from report parliamentary committee draft to plenary report

Added3. An investment firm that offers or recommends financial instruments which it does not manufacture, shall have in place adequate arrangements to obtain the information referred to in paragraph 1 and to understand the characteristics and identified target market of each financial instrument.

RemovedDirective (EU) 2016/97

Added4. An investment firm that offers or recommends financial instruments shall regularly review them, taking into account any event or risk that could materially affect the identified target market, to assess whether the financial instrument remains consistent with the objectives and needs of the identified target market and whether the monetary and non-monetary benefits are still relevant for the identified target market and reasonable compared to the costs and charges. The firm shall also consider whether the intended distribution strategy remains appropriate.

RemovedArticle 2 – paragraph 1 – point 16, Article 25 – paragraph 7 – point b: deleted

AddedAn investment firm which offers or recommends financial instruments falling under the definition of packaged retail investment products in accordance with Article 4(1) of Regulation (EU) No 1286/2014, shall:

RemovedDirective (EU) 2016/97

Added(a) identify and quantify ▌any further costs and charges related to the distribution not already taken into account by the manufacturer, including entry costs, exit costs and third-party payments received and retained by the distributor;

RemovedArticle 2 – paragraph 1 – point 16, Article 25 – paragraph 8: deleted / (deleted) / (deleted) / (deleted)

Added(b) assess whether the total costs and charges incurred for the distribution of the product, including those associated with the investment advice provided to the client, are justified and proportionate, having regard to the characteristics of the instrument, to the service provided and the target market’s objectives and needs (pricing process).

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Added(ba) assess additional product features and services that could impact the value and benefits provided to investors.

RemovedArticle 2 – paragraph 1 – point 16, Article 25 – paragraph 9 – subparagraph 1 – point a: deleted

Added▌

RemovedDirective (EU) 2016/97

Added4a. Member States shall ensure that investment firms consider, when complying with the product governance requirements, that the financial instrument's costs and charges are compatible with the objectives, needs and characteristics of the target market.

RemovedArticle 2 – paragraph 1 – point 16, Article 25 – paragraph 10 – subparagraph 1 – introductory part: EIOPA, after having consulted ESMA and the competent authorities and after industry testing, shall develop draft regulatory technical standards to determine the following:

AddedWhere an investment firm manufactures or distributes financial instruments falling under the definition of packaged retail investment products in Article 4, point (1), of Regulation (EU) No 1286/2014, it shall perform a peer grouping analysis in accordance with this paragraph. In their assessment, distributers may rely on the manufacturer’s peer grouping analysis.

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AddedAn investment firm which manufactures financial instruments shall in addition perform a peer analysis of historical performance when performing a product review of packaged retail investment products as defined in Article 4, point (1), of Regulation (EU) No 1286/2014.

RemovedArticle 2 – paragraph 1 – point 16, Article 25 – paragraph 10 – subparagraph 2: EIOPA shall submit those draft regulatory technical standards to the Commission by ... [9 months after the date of entry into force of this Directive].

AddedAn investment firm that offers or recommends financial instruments shall in addition perform a peer analysis of service costs based on an internal analysis of relevant peers in the market.

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AddedThe peer grouping evaluation shall be performed on the basis of a peer group defined by the investment firm. The investment firm shall substantiate and document the choice and definition of the peer group. If the product falls under the definition of a UCITS in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the Council, or of an AIF in Article 4(1), point (a), of Directive 2011/61/EU of the European Parliament and of the Council, the peer group may be based on the relevant European fund classification system in accordance with Directive 2009/65/EC of the European Parliament and of the Council or Directive 2011/61/EU of the European Parliament and of the Council.

RemovedArticle 2 – paragraph 1 – point 18, Article 26a – paragraph 4 – subparagraph 1: Where a manufacturer of an insurance-based investment product 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.

AddedESMA shall by ... [12 months after the entry into force of this amending Directive], develop guidelines on the process and criteria used by investment firms to carry out their peer grouping evaluation, and shall periodically update those guidelines.

RemovedAlignment with article 24c of Directive 2014/65/EU.

Added▌

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Added7. An investment firm shall document all assessments made and shall, upon request, provide such assessments to a relevant competent authority, including the justification and demonstration of the proportionality of costs and charges of the financial instrument.

RemovedArticle 2 – paragraph 1 – point 18, Article 26a – paragraph 4 a (new): 4a. Where an insurance undertaking or insurance intermediary uses the services of a third party that is remunerated or incentivised through non-monetary compensation by such insurance undertaking or insurance intermediary, in order to promote investments in one or several insurance-based investment products, or underlying investment options, and where such third party carries out such promotion through public social media platforms (“finfluencer”), the insurance undertaking or insurance intermediary shall comply with the following obligations: / (a) it shall establish a written agreement with the finfluencer determining the nature and scope of the activity to be carried out on behalf of the insurance undertaking or insurance intermediary; / (b) upon request, it shall provide to the competent authority with the identity and contact details of all finfluencers whose services it relies on; / (c) it shall regularly check that the activity of the finfluencers whose services it relies on complies with paragraphs 1 to 4.

AddedIn accordance with the information to be disclosed under Article 24b of this Directive, an investment firm which manufactures, offers or recommends financial instruments falling under the definition of packaged retail investment products in accordance with Article 4(1) of Regulation (EU) No 1286/2014, shall report to the competent authorities details of costs and charges of any financial instrument destined for retail investors, including where relevant, distribution costs incorporated in the costs of the financial instrument and costs related to the distribution of advice. The competent authorities shall transmit such data without undue delay to ESMA.

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AddedESMA, after having consulted EIOPA and the competent authorities and after industry testing, shall develop draft regulatory technical standards for the application of the requirements in this paragraph to specify the following:

RemovedArticle 2 – paragraph 1 – point 18, Article 26a – paragraph 7 – subparagraph 1: Member States shall ensure that insurance undertakings and insurance intermediaries keep records of all their marketing communications of insurance-based investment products provided or made accessible to retail customers or potential retail customers, or their marketing communications provided or made accessible to retail customers or potential retail customers that is made by any third party remunerated or incentivised through non-monetary compensation.

Added(a) in accordance with the information to be disclosed under Article 24b, the content and type of data to be reported to the competent authorities, based on existing disclosure and reporting obligations;

RemovedAlignment with article 24c MiFID.

Added(b) the formats, frequency and starting date for the information to be reported in accordance with the information to be disclosed under Article 24b.

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

RemovedArticle 2 – paragraph 1 – point 20, Article 29 – paragraph 1 – subparagraph 1 – point a – point ii: (ii) whether the advice is based on a broad or on a more restricted analysis of different types of insurance-based investment products and, where applicable, underlying investment options, and in particular, whether or not the range is limited to products and assets manufactured or provided by entities having close links with the insurance intermediary or insurance undertaking, or any other legal or economic relationships, such as contractual relationships, so close as to pose a risk of impairing the independent basis of the advice provided;

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

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Added8. An investment firm which manufactures and offers or recommends the financial instrument may establish one pricing process relating to both manufacturing and distribution stages.

RemovedArticle 2 – paragraph 1 – point 20, Article 29 – paragraph 1 – subparagraph 1 – point b: (b) a description of the main features of the proposed insurance-based investment product and, where applicable, any recommended underlying investment options and investment strategies, including appropriate guidance on, and warnings of, the risks associated with the insurance-based investment products and, where applicable, the recommended underlying investment options or in respect of particular investment strategies followed by that product;

Added▌

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Added10. The policies, processes and arrangements referred to in paragraph 1 to 9 shall be without prejudice to all other requirements under this Directive and Regulation (EU) No 600/2014, including those relating to disclosure, suitability or appropriateness, identification and management of conflicts of interests, and third-party payments.

RemovedArticle 2 – paragraph 1 – point 20, Article 29 – paragraph 1 – subparagraph 4 a (new): If the amount of third-party payments cannot be ascertained at the pre-contractual stage, the method for calculating the amount shall be clearly disclosed to the client in a manner that is comprehensible, accurate and understandable for an average retail client.

Added11. ESMA shall, by ... [12 months after the entry into force of the amending Directive], develop guidelines to specify criteria to determine whether costs and charges are justified and proportionate, and it shall periodically update those guidelines.

RemovedAlignment with modifications introduced by the Omnibus directive to Mifid II .

Added▌

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Added13. By ... [five years after the date of application of this amending Directive], Member States shall communicate to the Commission and ESMA all relevant information concerning the implementation of this Article. The Commission and ESMA may request additional information from national competent authorities.

RemovedArticle 2 – paragraph 1 – point 20, Article 29 – paragraph 3 – point b: (b) the annual performance of each of the underlying investment options of the insurance-based investment product and the annual global performance of the portfolio, each compared with past performance over previous years:

AddedOn the basis of this information provided by Member States, the Commission, in consultation with ESMA and EIOPA, shall carry out an evaluation of the effective implementation of this Article and assess in particular:

RemovedDirective (EU) 2016/97

Added(a) whether the effects of strengthened product governance requirements set out in this article have led to better value for money for citizens;

RemovedArticle 2 – paragraph 1 – point 20, Article 29 – paragraph 3 – point d: (d) where applicable, the market or estimated value when the market value is not available of the underlying investment options of the insurance-based investment product;

Added(b) the impact of the relevant provisions of this Directive on potential conflicts of interest associated with inducements, the evolution of costs, the overall level of retail investment in capital markets, consumer protection and the relevance of distribution rules;

RemovedDirective (EU) 2016/97