European Commission seeks to improve consumer protection in financial services

Today the European Commission proposed a new legislative package to improve consumer protection. The objective of the proposal is to develop strong, well-regulated financial retail markets that place the best interests of consumers at their heart. The proposal introduces consumer-friendly standards for information about investments, raises standards for advice, and tightens certain rules on investment funds to ensure their safety.

The package comprises of three major elements:

  • Packaged retail investment products (PRIPS): The Commission’s PRIPS proposal aims at improving the quality of information that is provided to consumers when considering investments. A new innovative standard for product information the “Key Information Document” (KID) will be introduced. Every manufacturer of investment products (e.g. investment fund managers, insurers, banks) will have to produce such a document for each investment product.
  • Insurance Mediation Directive (IMD) Revision: The Commission is proposing a revision of the IMD, which currently regulates selling practices for all insurance products, from general insurance products to those containing investment elements. The aim of the proposal is to create common standards across insurance sales and ensuring proper advice. This should be done by improving transparency and establishing a level playing field for insurance sales by intermediaries and sales by insurance undertakings.
  • Undertakings for Collective Investment in Transferable Securities (UCITS) V: The current legislation for investment funds (the UCITS Directive) has been the basis for an integrated market facilitating the cross-border offer of collective investment funds. The Commission proposes amendments to the current rules to ensure that the UCITS brand remains trustworthy by ensuring that the depositary’s duties and liabilities are clear and uniform across the EU.

Internal Market and Services Commissioner Michel Barnier argued: “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. 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.“ 

Monique Goyens, Director General of the European Consumer Organisation, commented that: “For too long, small investors have been lured into buying risky and unnecessarily complex products which all too often benefitted no-one but the bank salesperson. This Key Investor Document should help consumers to better understand the risk profile of a product and the charges they have to pay for it.“ She criticized, however, that: “More transparency of commissions in the insurance sector will not eradicate conflicts of interest. The sector is malfunctioning due to misconceived incentives given to bankers and intermediaries. More openness will only reveal the problem, not change the system.”


Further information: and

Source: European Commission and BEUC