The European Commission has proposed a package of legislative measures that aims to increase consumer protection in the financial services sector, saying these were needed in order to keep up with the growing complexity of financial services.
“Lack of transparency, low awareness of risks, and poor handling of conflicts of interest have meant that consumers across the EU have been repeatedly sold investment and insurance products that were not right for them,” the EC said in a statement outlining its proposal.
The package contains three legislative initiatives: a proposal for a regulation on key information documents for packaged retail investment products, a revision of the Insurance Mediation Directive, and a proposal to boost protection for those who buy investment funds.
The first proposal is meant to improve the quality of information that is provided to consumers when considering investments, by creating a consumer-friendly and plain-language ‘key information document’ that fund managers, insurers and banks will be required to produce for all their investment products. These should follow a common standard as regards structure, content, and presentation so that consumers can use the document to compare different investment products, the EC said.
The Commission is also proposing a revision of the insurance mediation directive to upgrade consumer protection in the insurance sector by creating common standards across insurance sales and ensuring proper advice. “It will do so by improving transparency and establishing a level playing field for insurance sales by intermediaries and sales by insurance undertakings,” the EC said.
Concerning investment funds, the proposed changes set out to define clear rules on the remuneration of fund managers, introducing a common approach to how core breaches of the legal framework are sanctioned, as well as creating a precise definition of the tasks and liabilities of all depositaries acting on behalf of an investment fund.
“In the aftermath of the biggest financial crisis in recent memory, the financial sector must place consumers at its heart. Retail products must be safer, information standards must become clearer, and those selling products must always be subject to the highest standards,” internal market and services commissioner Michel Barnier said.
“That is why we have adopted a package solely dedicated to consumers, so that they can choose financial products based on clear and sound information and professional advice which puts the consumer’s interests first,” he said.
(Internal market and services commissioner Michel Barnier photo by European Commission)