Changes from report parliamentary committee draft to plenary report

Added(c) the implementation of financial literacy measures.

RemovedArticle 2 – paragraph 1 – point 20, Article 29 – paragraph 5 – subparagraph 1: Member States shall ensure that insurance intermediaries and insurance undertakings distributing insurance-based investment products display appropriate warnings in information material, including marketing communications, provided to retail customers to alert them on the specific risks of potential losses carried by particularly risky insurance-based investment products and, where applicable, underlying investment options.

AddedIf the evaluation carried out by the Commission proves that the implementation of the new product governance requirements set out in this Article provides no positive change for consumers, the Commission shall accompany its report by a legislative proposal to amend this Directive, if appropriate.

RemovedDirective (EU) 2016/97

Added(10) Article 16a is replaced by the following:

RemovedArticle 2 – paragraph 1 – point 21, Article 29a – paragraph 1: deleted / (deleted) / (deleted)

Added‘Article 16a

RemovedDirective (EU) 2016/97

AddedExemptions from product governance requirements

RemovedArticle 2 – paragraph 1 – point 21, Article 29a – paragraph 4 – subparagraph 1: Member States may impose stricter requirements on insurance intermediaries and insurance undertakings in respect of the matters covered by this Article. In particular, Member States may prohibit or restrict the offer or acceptance of fees, commissions or non-monetary benefits from third parties in relation to the provision of insurance advice.

AddedAn investment firm shall be exempted from the requirements set out in the Article 16-a(1) and in Article 24(2), where the investment service it provides relates to bonds with no other embedded derivative than a make-whole clause or where the financial instruments are marketed or distributed exclusively to eligible counterparties.’;

RemovedDirective (EU) 2016/97

Added(11) in Article 21, the following paragraphs 3 and 4 are added:

RemovedArticle 2 – paragraph 1 – point 21, Article 29a – paragraph 6: 6. Five years after the end of the transposition period of Directive (EU) [OP Please introduce the number of the amending Directive] and after having consulted ESMA and EIOPA, the Commission shall assess the impact of the relevant provisions of Directive (EU) [OP Please introduce the number of the amending Directive] on the 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.

Added‘3. ESMA or the competent authority of any host Member State on the territory of which a firm is active may request that the competent authority of the home Member State examines whether that firm still meets the conditions for authorisation as established in Chapter I.

RemovedA 3-year period is far too short to assess the changes introduced by the RIS given the number of modifications and the time required for their implementation. Additional hindsight is necessary for the Commission to have an accurate view on the impact of the RIS. Moreover, the review should not only focus on the question of inducements but be more exhaustive to cover the same range of topics addressed by the directive (e.g., conflicts of interest, evolution of costs after the implementation of value for money, the relevance of distribution rules given new business models in the sector).

AddedESMA shall be made aware of such request. The competent authority of the home Member State shall communicate its findings to the competent authority of the host Member State and ESMA within two months following the request.

RemovedDirective (EU) 2016/97

Added4. In the case of justified concerns about potential threats to investor protection, ESMA may, on its own initiative or at the request of one or more of the competent authorities, set up and coordinate a collaboration platform under the conditions set out in Article 87a.’;

RemovedArticle 2 – paragraph 1 – point 21, Article 29b – paragraph 1 – point a: (a) to inform the customer of the range of insurance-based investment products or, where applicable, underlying investment options assessed by the insurance undertaking or insurance intermediary, and to provide such advice on the basis of an assessment of an appropriate range of insurance-based investment products or, where applicable, underlying investment options, suitable to the client's needs;

Added(12) Article 24 is amended as follows:

RemovedDirective (EU) 2016/97

Added(a) paragraph 1 is replaced by the following :

RemovedArticle 2 – paragraph 1 – point 21, Article 29b – paragraph 1 – point b: (b) to recommend, taking into consideration its performance, level of risk, costs and charges reported pursuant to Article 25(1c), the most efficient insurance-based investment product or, where applicable, underlying investment options among the insurance-based investment products identified as suitable for the customer pursuant to Article 30(1) and offering similar features;

Added‘1. Member States shall require that, when providing investment services or, where appropriate, ancillary services to clients, an investment firm act honestly, fairly and professionally in accordance with the best interests of its clients and comply, in particular, with the principles set out in this Article and Articles 24a to Article 25.’;

RemovedDirective (EU) 2016/97

Added(b) the following paragraph 1a is inserted:

RemovedArticle 2 – paragraph 1 – point 21, Article 29b – paragraph 1 – point c: deleted

Added‘1a. Member States shall ensure that, in order to act in the best interest of the client, when providing investment advice to retail clients, investment firms are under an obligation:

RemovedDirective (EU) 2016/97

Added(a) to inform the client of the range of financial instruments assessed by the investment firm, and to provide advice on the basis of an assessment of an appropriate range of financial instruments suited to the clients’s needs, whereby the range of financial instruments is adapted to the business model of the investment firm;

RemovedArticle 2 – paragraph 1 – point 21, Article 29b – paragraph 1 a (new): 1a. Insurance undertakings and insurance intermediaries tied by exclusive partnerships may build the appropriate range of insurance-based investment products referred to in paragraph 1, point (a), among products or, where applicable, underlying investment options offered by only one insurance undertaking. In that case, customers shall be informed in accordance with the applicable requirements.

Added(b) to recommend the most ▌efficient financial instruments among financial instruments identified as suitable to the client pursuant to Article 25(2) and offering similar features, taking into consideration its performance, level of risk, qualitative elements, costs and charges reported pursuant to Article 16-a, and, if an equivalent product with higher costs is recommended, to justify this on objective grounds and keep records of that justification;

RemovedDirective (EU) 2016/97

Added▌

RemovedArticle 2 – paragraph 1 – point 21, Article 29b – paragraph 2 – subparagraph 2: Those delegated acts shall take into account the nature of the services offered or provided to the customer, the nature of the products, and where applicable, underlying investment options, being offered or considered, including different types of insurance-based investment products, or where applicable, underlying investment options;

Added(ca) not to place the investment firm’s financial or other interests ahead of the client’s interests.

RemovedDirective (EU) 2016/97

Added1b. Where investment firms are subject to an inducement ban, the conditions of this Article shall be presumed to be fulfilled. The national competent authority may reverse this presumption if an investment firm does not comply with the provisions in this Article.

RemovedArticle 2 – paragraph 1 – point 22 – point a, Article 30 – paragraph -1 – subparagraph 1: Member States shall require that insurance intermediaries and insurance undertakings distributing insurance-based investment products assess the suitability or appropriateness of insurance-based investment products and, where applicable, underlying investment options to be recommended to or demanded by customers in good time before the customers are bound by an insurance contract or offer. Each of these assessments shall be carried out on the basis of proportionate and necessary information about the customer as obtained by the insurance intermediary or insurance undertaking in accordance with the requirements set out in this Article.

AddedESMA may organise and conduct a mandatory peer review in cooperation with national competent authorities regarding the implementation of the obligations described in this Article.

RemovedDirective (EU) 2016/97

Added1c. Where none of the financial instruments offered by the investment firm is in the best interest of the client, the investment firm shall refrain from giving any advice or making any recommendation.

RemovedArticle 2 – paragraph 1 – point 22 – point b, Article 30 – paragraph 1 – subparagraph 1: Without prejudice to Article 20(1), when providing advice on insurance-based investment products, the insurance intermediary or insurance undertaking shall obtain the information regarding the customer’s knowledge and experience in the investment field relevant to the specific type of insurance-based investment product or, where applicable, underlying investment options, offered or demanded, that customer’s financial situation, including the composition of any existing portfolios, its ability to bear full or partial losses, investment needs and objectives, including any sustainability preferences, and risk tolerance, so as to enable the insurance intermediary or the insurance undertaking to recommend to the customer the insurance-based investment products that are suitable for that person and that, in particular, are in accordance with its risk tolerance, ability to bear losses and need for portfolio diversification.

Added(c) in paragraph 2, the first subparagraph is replaced by the following:

RemovedDirective (EU) 2016/97

Added‘Member States shall ensure that investment firms which manufacture financial instruments for sale to clients:

RemovedArticle 2 – paragraph 1 – point 22 – point b, Article 30 – paragraph 1 – subparagraph 3: When providing advice that involves switching between underlying investment options, insurance intermediaries and insurance undertakings shall obtain the necessary information on the customer’s existing underlying investment options and the recommended new investment assets and shall analyse the expected costs and benefits of the switch, so that they are reasonably able to demonstrate that the benefits of switching are expected to be greater than the costs.

Added(a) design those financial instruments to meet the needs of an identified target market of end clients within the relevant category of clients;

RemovedDirective (EU) 2016/97

Added(b) design their strategy for the distribution of the financial instruments, including in terms of marketing communication and marketing practices, in a way that is compatible with the identified target market;

RemovedArticle 2 – paragraph 1 – point 24, Article 35a – paragraph 1 – subparagraph 1 a (new): The first subparagraph shall also apply to any third party (“finfluencer”) that is remunerated or incentivised through non-monetary compensation by an insurance undertaking or insurance intermediary without being registered in accordance with Article 3 of this Directive or authorised in accordance with Article 14 of Directive 2009/138/EC, where such third party promotes through public social media platforms services or insurance-based investment products or underlying investment options on behalf of such an insurance undertaking or insurance intermediary.

Added(c) take reasonable steps to ensure that the financial instruments are distributed to the identified target market.’;

RemovedDirective 2009/65/EC

Added(d) paragraph 3 is replaced by the following:

RemovedArticle 4 – paragraph 1 – point 1 – point a, Article 14 – paragraph 1 e – subparagraph 1: Member States shall require management companies to assess at least annually the conditions mentioned in paragraph 1b, point (b). The assessment shall take into account the criteria set out in the pricing process.

Added‘All information, addressed by the investment firm to clients or potential clients shall be fair, clear and not misleading.’;

RemovedDirective 2009/65/EC

Added(e) paragraph 4 is amended as follows:

RemovedArticle 4 – paragraph 1 – point 1 – point a, Article 14 – paragraph 1 e – subparagraph 2: deleted