European Law Monitor

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European Law Monitor NewsFinancial services: call for evidence on substitute investment products

The European Commission has published a call for evidence on the impact of the fragmented regulatory landscape for retail investment products on the protection of retail investors. Input from all interested stakeholders is invited by 18 January 2008. Responses to this consultation will contribute to the Commission's assessment of whether existing rules are sufficient to protect retail investors and, if not, whether corrective action is needed.

Internal Market and Services Commissioner Charlie McCreevy said: "A wide range of investment products are now available to help retail investors take responsibility for their long-term financial futures. Today, the EU legislative framework imposes different levels of product and fee disclosure, and different selling rules, depending on the legal form the product takes. I believe that there is a strong case for investigating whether these differences are harming investors and distorting markets. However, we will not rush into an ill-considered response; it is essential that we tackle this issue with an open mind and in a responsible manner. This call for evidence is a vital first step. I hope for considered and evidence-based responses from across the entire spectrum of stakeholders • from the different financial sectors, investors and regulators."

Continuing innovation in the structuring of retail investment products has meant that retail investors are now able to choose between a variety of different product types to meet their investment needs.

However, EU legislation applying to the institutions that originate these products imposes different rules on the product information that must be disclosed (for example, on risks, charges and expected returns), and on the way in which financial intermediaries must conduct business with retail clients, and manage any conflicts of interest that might arise. Regulators, financial institutions and consumers have expressed concern that this might represent a threat to the protection of retail investors.

The main purpose of this call for evidence is to establish whether this fragmented regulatory landscape leads to unacceptably large variation in the level of product disclosure and in conduct of business rules, resulting in a real and significant risk to investor protection. All interested parties are asked to provide input, backed by concrete evidence wherever possible, on: which investment products should be taken into consideration; the factors driving the sale and promotion of particular investment products; whether and how varying information disclosures or distribution regulations lead to investor detriment; and, if material risks are identified, on the need for corrective action.
Contributions should be sent by 18 January 2008 to

A feedback statement on the responses received will be produced in March 2008, followed by a structured dialogue with all interested stakeholders. This will enable the Commission to draw evidence-based and informed conclusions on the need for action in this area in autumn 2008.
The call for evidence is available at: