Michel Barnier, the European commissioner for the internal market and services, will next week publish proposals that aim to ensure consumers are given clearer and more accurate information when investing money.
The European Commission has been mulling over the introduction of standardised rules to cover packaged retail investment products (PRIPS) for several years. Barnier considers this proposal to be another significant step in his overhaul of financial services legislation in the wake of the eurozone crisis.
Barnier (pictured) will propose a regulation to harmonise consumer protection and increase transparency in investment packages that typically comprise several different financial assets put together by investment firms.
The Commission, which carried out a consultation exercise at the turn of the year, believes that the rules will go some way to addressing what it sees as significant failings in the market for such retail investments, namely the inconsistencies in the information given by the firms producing and selling investments and the conflicts of interest shown by those who give advice on products to consumers.
The Commission believes that there is “unco-ordinated regulation” across the EU, and that this has led to “significant differences in the level of standards between sectors”, with some products not regulated at all.
The proposal, which will be published on Tuesday (3 July), will go forward to the European Parliament and Council of Ministers, which must reach agreement before it can become law. Disagreement is likely to arise over the scope of the legislation, particularly in the type of investment products it should regulate. Trade bodies have warned against pension plans being subject to the rules.
As part of the legislative proposals, Barnier will announce a revision of the undertakings for collective investment in transferable securities directive (UCITS). This will introduce rules on the remuneration of fund managers and sanctions to prevent excessive risk-taking.
He will also propose a revision of the insurance mediation directive that will aim to strengthen the quality of information that insurance product sellers are obliged to give and to regulate the remuneration the seller receives.
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