Making citizens invest in Europe’s capital markets is core to the Savings and Investment Union (SIU). However, EU-wide rules agreed in the ‘trilogue’ between the European Parliament (EP) and the Council on 18 December do not make the EU’s offer to the retail investor more attractive. Inducements or conflicts of interest in investment products are formally allowed in the draft text, subject to certain conditions. Moreover, the compromise is an example of complexity, going against the objective of simplification adopted in ECOFIN a few days before.
The lengthy discussions on the Retail Investment Strategy (RIS), which aim to further harmonise rules for product manufacturers and distributors, have led to disappointing outcomes. The initial proposal already left much to be desired, as the Commission didn’t forbid inducements, but rather limited them to execution-only or non-advised sales and suggested applying a ‘best interest’ test. The proposal changes different rules – like an ‘omnibus’ – starting with the Markets in Financial Instruments Directive (MiFID II) and the Insurance Distribution Directive (IDD).
The trilogue outcome, which still needs to be passed during the EP plenary, further waters down the initial proposal. The core issue is inducements, which have moved up in priority, whereas other parts were moved down, including the best interest, suitability and appropriateness tests – except for the value-for-money (VfM) measurement.
