Questions and answers on the Retail Investment Package

Following the publication of the proposed new „retail investor package“ which consists of two separate pieces of proposed legislation to improve retail investor engagement in the financial market in the EU (please see EventID 21279 and EventID 21284 in this context), the European Commission (EC) has published a corresponding set of questions and answers (Q&As). In brief, both legislations would implement targeted amendments to numerous directives and regulations to enhance disclosures made by firms distributing financial products to retail clients, improve „value for money“ for retail investors, better protect investors from misleading advertisement, and facilitate easier access to financial advice.
The Q&As now provide information on the reasoning behind the issuance of the new package, shortcomings of current rules and laws and why changes are needed, and the key content of the package in terms of obligations that will have to be met by firms engaged in the manufacturing or distribution of financial products offered and sold to retail clients (e.g. fund management companies, insurance companies, investment firms, fund managers, etc.).
The key questions contained in the document are noted below – as quoted; for all of them, please consult the original document:
– What does the Retail Investment Package aim to achieve?
– What is the problem with retail participation in capital markets in the EU?
– What are the main problems with the current legislative framework?
– How does today’s package address these problems?
– What are the main changes in a nutshell?
– What are the specific changes to disclosure requirements for insurance-based products and other insurance contracts about?
– What are the main changes to the Packaged retail and insurance-based investment products (PRIIPs) Regulation?
– What does “Value for Money” mean, why is it needed and for what products does it apply?
– How will the principle of “Value for Money” be implemented?
– What benchmarks are used when assessing when costs are justified and proportionate?
– How will the “Value for Money” assessment against benchmarks work?
– To whom do the Value for Money” requirements apply? What are the role and obligations of distributors?
– What are the new rules on undue costs for products covered by the UCITS Directive and AIFMD?