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Packaged retail investment products
This Communication proposes a common definition of packaged retail investment products and a harmonised framework in terms of information and sales in order to restore confidence in financial markets.
ACT
Communication from the Commission to the European Parliament and to the Council of 30 April 2009 - Packaged retail investment products [COM(2009) 204 final – Not published in the Official Journal].
SUMMARY
This Communication presents the measures planned by the European Commission in the packaged retail investment products sector and more specifically in terms of mandatory information and commercial practices. The aim is bring the Community framework into line with market reality. In this regard, the Commission intends to introduce, at European level, a horizontal approach in the field of retail investment products.
Characteristics
Packaged retail investment products have the following points in common:
These products include the following types:
Current weaknesses
Packaged retail investment products can be at the origin of risks where there is a sharp asymmetry in information and expertise between the manufacturers and distributors of products and retail investors.
Another main weakness of this type of product is related to the inconsistencies in the European regulatory framework in force. It is currently inadequate with regard to the retail investment market reality and is not able to offer investors a satisfactory level of protection.
The main failings of the Community framework for packaged retail investment products have their origin in the lack of key investor disclosures and in the regulation of commercial practices.
Proposals for a horizontal approach
Key investor disclosures
Information for retail investors should be harmonised and standardised as much as possible so that they are better able to compare products.
Key information made available to investors should comply with the following criteria:
Selling of packaged retail investment products by intermediaries and other distributors
The MiFID (Markets in Financial Instruments Directive) provisions are considered to be a benchmark on conduct of business and the management of conflicts of interest. The Commission suggests that the scope of MiFID be extended to all packaged retail investment products.
The horizontal approach governing the regulation of commercial practices would be based on the following principles:
It is still necessary however to establish a generic definition of the concept of “a packaged retail investment product”, and a clear designation of the products that fall within scope.
Context
This Communication is the result of work carried out following the request by the ECOFIN Council in May 2007, and has the aim of restoring confidence with regard to financial markets. It is part of the reforms launched by the European Union since the start of the financial crisis in October 2008. This demonstrated the importance of ensuring transparency in financial products and brought to light the disastrous consequences of irresponsible marketing.
Last updated: 20.08.2009