EUROPE: Commission publishes feedback statement to its call for evidence on “substitute” retail investment products

Thursday April 3 2008

The European Commission has today published a feedback statement to its call for evidence on `substitute` retail investment products. The call for evidence invited views on whether differences in EU rules on the transparency and distribution of retail investment products – including investment funds, unit-linked life insurance products and structured securities – give rise to material differences in the level of regulatory protection for retail investors. It also invited opinions on whether action was needed at EU level to respond to any identified weaknesses. The feedback statement summarises the wide range of views expressed in the 80 responses received from 21 countries, including 17 European Union Member States.

In summary, the call for evidence invited evidence and views on the existence of a real and significant risk to investor protection arising from variations in rules on product transparency and distribution that apply depending on the status of the retail investment product (including investment funds and structured securities). The feedback statement provides a high-level synthesis of the 80 written submissions received Stakeholders differed widely in their assessment of whether different sectoral rules on product transparency and distribution gave rise to investor protection concerns. Responses from all consumers, many public authorities and some industry sectors revealed concern that these differences may give rise to risks to investors. However, many industry participants argued that the protections built in to existing EU rules – in combination with national rules and self-regulatory initiatives – provide a robust framework for investor protection and are well-tailored to different product types.

It was noted that important EU legislation–MiFID and Insurance Mediation Directive – have only recently entered into force and should be given their chance to prove their worth. The feedback statement also summarises the wide spectrum of views on whether corrective action is needed at EU level – or whether it is sufficient to rely on national or self-regulatory initiatives to complement EU legislative provisions.

As part of this consultation process, a public hearing will be held on 15 July 2008 in Brussels.

Further Details on the public hearing will be published shortly.

To download the feedback statement, together with all contributions authorised for publications, follow the above link.