As an investor protection, the Chair supports the banning of inducements provided to investment advisers, which he views as an important factor leading to unsuitable products being recommended to clients. The problem cannot be solved by more transparency alone, he emphasized, and the disclosure of inducements is simply not sufficient. At a minimum, regulators must ban inducements in the case of discretionary portfolio management and when an adviser wants to use the independent label. In his view, banning inducements will contribute to achieving a viable business model with a high level of investor trust.
In addition, in response to the retailization of complex financial products which increases the risk that retail investors do not understand the risks attached to their investments, ESMA will propose the improvement of implementation standards of those provisions of the MiFID Directive involving information to clients, suitability and appropriateness. In the ESMA Chair’s view, reinforcing MiFID conduct rules as financial instruments grow in complexity and internet use increases will enhance investor protection.
In this regard, Chairman Maijoor said that ESMA will remind both regulators and financial firms about selling practices for complex products, including, for example, the sale of structured products to retail investors, and platforms giving access to complex products. ERSMA is currently developing an investor communication explaining the risks of investing in complex products and structured products. This will be a complement to the investor warning ESMA issued last month regarding the pitfalls facing investors when using the Internet for investment purposes.
On the distribution of complex products, ESMA is continuing to map the various national initiatives to get a better understanding of the rationale for those initiatives, and to identify existing problems and issues. The aim is to consider what ESMA could do at the European level to improve investor protection in relation to the distribution of complex structured products by establishing common ground where possible for distribution frameworks of complex structured products across the EU.
In addition to issuing final guidelines on the remuneration of hedge fund managers under the Alternative Investment Fund Managers Directive, ESMA is negotiating co-operation agreements with the
and other non-EU authorities,
which have to be in place by July 2013.
ESMA is leading the negotiations on behalf of the EU competent
authorities, said the Chairman, which makes sense both in terms of efficiency
and in helping achieve a consistent result across jurisdictions. A common text has been agreed on the EU side
and ESMA is now negotiating with its US and non-EU counterparts on the
basis of that text. ESMA is fully aware
of the importance of having the agreements in place in a timely manner and will
look to make progress as quickly as possible, while bearing in mind the need to
have robust arrangements that deliver what is required by the AIFMD. US