EFAMA sees no level playing field in MiFID II

Industry body EFAMA has reacted with disappointment to the latest agreement at the EU level affecting the Markets in Financial Instruments Directive (MiFID II), citing a missed opportunity to ensure a level playing field with insurance products.

In the words of European Commissioner Michel Barnier the latest agreement regarding updated rules on MiFID should represent a new path forward for Europe’s asset management industry.

On 14 January he stated: “I welcome the agreement in principle reached today by the European Parliament and the Council on updated rules for markets in financial instruments (MiFID II). These new rules will improve the way capital markets function to the benefit of the real economy. They are a key step towards establishing a safer, more open and more responsible financial system and restoring investor confidence in the wake of the financial crisis.”

The agreement as outlined by Barnier introduces changes on seven key points, whereby MiFID II will:

– introduce a market structure framework

– increase equity market transparency

– strengthen supervisory powers

– improve conditions for competition in the trading and clearing of financial instruments

– introduce trading controls for algorithmic trading activities

– strengthen investor protection by introducing better organisational requirements

– ensure effective and harmonised administrative sanctions

– and harmonise the regime for granting access to EU markets for firms from third countries.

On the face of it these changes ought to improve prospects for asset managers.

However, EFAMA, which represents the industry across Europe, expressed disappointment with what it has identified as a lack of a level playing field between insurance products and other financial investment products. This is because insurance products were omitted from the final agreement EFAMA noted.

In response, it has urged the European Parliament and Council to restart stalled negotiations on the Insurance Mediation Directive (IMD II), to ensure end investors are given the same level of protection and transparency across all financial products.

Peter de Proft, director general of EFAMA (pictured), said: While we applaud the EU for having concluded its widest reform of the European financial markets since 2007, we are disappointed that not all financial products have been treated equally. We believe that it is the best interests of the investor that the same rules apply across the board. We therefore call on European co-legislators to use IMD II to rectify this and ensure that moving forward there is a level playing field for all.”

“This is fundamentally about cross-product investor protection. It is not about which products might have lower performances through a higher regulatory burden. One of the basic ideas of the broad financial reforms, which is now often forgotten, was to improve the conditions of how products are sold to end investors.

“EFAMA categorically does not argue for a lower level of transparency. On the contrary, information that is clear, simple and transparent benefits the end investor in making an informed investment decision, and we fully support that.

“Where a number of current regulatory initiatives fall short is when products with similar investment intentions are treated differently. This then leads to different and indeed confusing disclosures for end investors that fall short of a number of intended aims of the financial reforms agenda, such as transparency for the end investor

“For this reason we are pleased that Parliament included all types of packaged retail investment products in the scope for the PRIPS KID.”

However, de Proft added that his organisation is now concerned that what once was a plan by the European Commission to implement reform at the same time to both MiFID and IMD is becoming unfeasible.

“While MiFID has now been completed, only a few weeks remain in this parliamentary mandate to conclude the revision of IMD, and IMD is a dossier that seems to have been forgotten by both the European Parliament and the Council. EFAMA is now urging the co-legislators to use this time to restart work on the IMD dossier and to align the disclosure requirements of MiFID II to the IMD revision, as originally intended.”

Key links

Further information on the latest developments in MiFID, including reference material, is available via the European Commission’s Europa website.


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