Council of the European Union Agrees Negotiating Mandate on Retail Investment Package

The Council of the European Union has announced that it has agreed its negotiating position on the retail investment package and published the relevant texts. The package consists of an amending Directive, known as the Omnibus Directive, which revises existing rules set out in the Markets in Financial Instruments II package, the Insurance Distribution Directive, the Undertakings for the Collective Investment in Transferable Securities Directive, the Alternative Investment Fund Managers Directive, and Solvency II, as well as an amending Regulation, which revises the Packaged Retail and Insurance-based Investment Products Regulation. The main changes proposed by the Council are:

• The removal of the Commission's proposed ban on "inducements" received for execution-only sales, as a ban is already in place for independent investment advice and portfolio management with limited exceptions.
• A new concept of "value for money" to ensure that investment products are offered to retail clients only if they offer good value for money. Manufacturers and distributors would be required to assess whether costs and charges related to a product are justified and proportionate with regard to their performance, other benefits and characteristics, their objectives and, if relevant, their strategy. The Council agreed that the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority should develop EU supervisory benchmarks, but suggested that instead of mandatory benchmarks integrated in manufacturers' and distributors' product governance process, there should be a supervisory tool, developed in a way that helps national competent authorities detect investments products that fail to offer value for money.

The European Parliament has already agreed its negotiating mandate on the package, so interinstitutional negotiations can begin. Several of the changes to improve the MiFID II and PRIIPS regimes reflect changes that have already been made or announced in the U.K. under its Smarter Regulatory Framework.

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