Joint Committee

The European Supervisory Authorities (ESAs) have today issued a consultation paper on targeted amendments to the Delegated Regulation covering the rules for the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs).

The ESAs, on 1 October 2018, set out in a letter to the European Commission their intention to make proposals to support legislative changes to avoid the possibility of duplicating information requirements for investment funds from 1 January 2020, and to tackle key issues that have arisen since the implementation of the KID. The consultation paper addresses, in particular, amendments to the information regarding investment products’ performance scenarios.

The proposals are made in the context of the ongoing discussions between the European co-legislators on the application of the KID by certain investment funds as well as the timing of a wider and more comprehensive review of PRIIPs, which was due this year. The outcome of this targeted review is without prejudice to that wider review, and it would be beneficial to conduct such a wider review early in the next term of the European Parliament.  

In addition, when deciding upon the nature of their final recommendations following this consultation in January 2019, the ESAs will take into account the feedback from respondents to this consultation and the latest information of these political discussions on the application of the KID by certain investment funds and the timing of the wider review.

The deadline for submission of feedback is by Thursday, 6 December 2018.

Background

The KID for PRIIPs is a mandatory, three-page A4 information document to be provided to consumers before purchasing a PRIIP. PRIIPs include for example funds, structured products, unit-linked and with-profits life insurance contracts, and structured deposits.

The PRIIPs Regulation (No 1286/2014) defines the main rules and principles for KIDs. It is supplemented by a Delegated Regulation (2017/653) specifying the presentation and contents of the KID, which is based on Regulatory Technical Standards that the ESAs were mandated to develop.

Performance scenarios are included in the Section of the KID titled “What are the risks and what could I get in return?” They indicate how the investment could perform under various different scenarios.

 

The Joint Committee of the three European Supervisory Authorities (EBA, EIOPA and ESMA - ESAs) has launched a public consultation to amend the Implementing Regulations on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk to reflect the outcomes of a monitoring exercise on the adequacy of existing mappings, namely changes to the Credit Quality Steps (CQS) allocation for two ECAIs and the introduction of new credit rating scales for ten ECAIs. 

The Implementing Regulations are part of the EU Single Rulebook for banking and insurance aimed at creating a safe and sound regulatory framework consistently applicable across the European Union (EU). The consultation runs until 31 December 2018. Further information on responding to the consultations can be found on the website of the Joint Committee

Steven Maijoor, Chair of the European Securities and Markets Authority (ESMA), has delivered the following statement to the Economic & Monetary Affair Committee (ECON) at the European Parliament as part of the annual hearing of the chairs of the three European Supervisory Authorities (ESAs).

 

MiFID II

In his statement Mr. Maijoor focused on ESMA’s progress on the implementation of MiFID II:

“MiFID II has given a new perspective on the use of ESMA’s Opinions: in the last 12 months, ESMA issued around 400 Opinions to NCAs on both pre-trade transparency waivers and position limits in commodity contracts, and a few hundred more will be finalised soon.”

“The application date of the MiFID II/MiFIR package marked the assignment of new product intervention powers to ESMA. This was an important development for retail investors in the EU, who have been put at risk for years by Binary Options and Contracts for Differences (CFDs), distributed across the EU out of a few Member States. Equipped with these new powers, ESMA adopted in spring this year measures banning Binary Options and restricting the sales, marketing and distribution of CFDs, and so directly improved retail investor protection across the Union.”

“Overall, I believe that MiFID II implementation is a very good example of what ESMA’s contribution to investor protection, orderly markets and financial stability in the EU financial markets can and should be. I would underline that this project is still ongoing, and significant allocation of resources, in particular for data and IT issues, market monitoring and supervisory convergence work, continues to be planned over the next months.”

Capital Markets Union

“We have progressed swiftly on a number of Level 2 mandates assigned to ESMA under the new Prospectus and Securitisation Regulations. In both cases, the co-legislators arranged for a sufficiently long implementation period, which is helpful for planning and executing ESMA’s work.

“Furthermore, ESMA has continued to support the CMU project through its multiple supervisory convergence activities. This included, during the year, important peer reviews – on Guidelines dealing with Efficient Portfolio Management Techniques (EPM) for UCITS and on certain aspects of the compliance function under MiFID I – and the cross-sectoral project on the performance and fees of investment services, which has been carried out jointly with the EBA and EIOPA.. I believe it is important to keep the momentum of these convergence activities, as a number of CMU areas require further attention, including participation of retail investors in the capital markets.”

UK withdrawal from the European Union

He also spoke about ESMA’s work on preparing for the withdrawal of the UK from the European Union:

“[As] as the supervisor of Credit Rating Agencies and Trade Repositories in the EU with a number of them headquartered in London – ESMA required appropriate contingency planning from individual supervised entities. We are carefully monitoring the execution of these plans to ensure that they are meeting all the requirements in the EU27 in case of a no-deal by the end of March 2019.”

Joint Committee of the European Supervisory Authorities

As the current Chair of the Joint Committee of the three European Supervisory Authorities, Steven Maijoor also delivered a statement on the work of the Joint Committee over the past year, focusing primarily on PRIIPs issues and developments in anti-money laundering.

Today, the European Supervisory Authorities (ESAs) wrote a letter to the European Commission expressing their concerns regarding the possibility of duplicating information requirements for investment funds from 1 January 2020 and the importance of legislative changes to avoid such a situation. 

Additionally, to support such changes, as well as to address key issues that have arisen from the practical application of the Key Information Document (KID) for Packaged Retail and Insurance-based Investment Products (PRIIPs), the ESAs intend to propose targeted amendments to the PRIIPs Delegated Regulation.

Taking into account the time needed for the co-legislators to scrutinise any amendments to the Delegated Regulation, the ESAs intend to submit proposals to the European Commission in the first quarter of 2019. As part of this process, the ESAs intend to launch a short public consultation during the fourth quarter of this year. 

Background

The ESAs’ letter responds to two letters received from the European Commission in July  and August stating a deferral of the review of the PRIIPs Regulation and requesting guidance from the ESAs regarding the information to be disclosed for investment funds.

The KID for PRIIPs is a mandatory, three-page A4 information document to be provided to consumers before purchasing a PRIIP. PRIIPs include for example funds, structured products, unit-linked and with-profits life insurance contracts, and structured deposits.

The PRIIPs Regulation defines the main rules and principles for KIDs. It is supplemented by a Delegated Regulation specifying the presentation and contents of the KID, which is based on Regulatory Technical Standards that the ESAs were mandated to develop.

The Joint Board of Appeal of the European Supervisory Authorities (ESAs – European Banking Authority, European Insurance and Occupational Pensions Authority, and European Securities and Markets Authority) publishes today its decision in an appeal brought by "B" against the European Securities and Markets Authority (ESMA).

The appellant sought to appeal against a decision of ESMA not to open a formal investigation of the Cyprus Securities and Exchange Commission (CySEC) in in relation to certain dealings in binary options and contracts for differences.

The Board of Appeal unanimously held that it had no jurisdiction to hear the appeal.

 

In accordance with Article 61 of the ESMA Regulation, the appellant has a right of appeal to the Court of Justice of the European Union.

The three European Supervisory Authorities (ESAs) – EBA, EIOPA and ESMA – today published the results of their monitoring exercise on automation in financial advice. The Report shows that while the phenomenon of automation in financial advice seems to be slowly growing, the overall number of firms and customers involved is still quite limited. As the identified risks have not materialised and considering the limited growth of the phenomenon, the ESAs believe that no immediate action is necessary. 

Through this Report, the risks and benefits of this phenomenon, which had previously been identified by the ESAs have largely been confirmed by national competent authorities (NCAs) and remain valid.
 
In examining emerging business models, the ESAs found that automated services are being offered, through partnerships, by established financial intermediaries, rather than by pure FinTech firms. Additionally, some new trends are emerging such as the use of Big Data, chatbots and a broader range of products.
 
The ESAs concluded that given the overall importance of the topic, and the emergence of some ongoing changes to business models, a new monitoring exercise will be conducted if and when the development of the market and market risks warrant this work.

Background

Following the publication of the Report on Automation in Financial Advice in 2016, this new analysis has been carried out through a survey involving NCAs, on the evolution of 'automation in financial advice' in the securities, banking and insurance sectors over the past two years.

The European Securities and Markets Authority (ESMA) has published the responses received to its Consultation on amendments to the EMIR Clearing Obligation under the Securitisation Regulation.

To view the responses, please click the button below.

The Joint Committee of the European Supervisory Authorities (ESAs) is holding today its sixth annual Consumer Protection Day. The event brings together 250 consumer representatives, finance industry representatives and regulators to address major challenges facing consumer protection in financial services across the European Union.

Steven Maijoor, Chair of the European Securities and Markets Authority and the current Chair of the Joint Committee, said:

“The ultimate goal of the ESAs’ activities, both individually and through the Joint Committee, is ensuring a consistent level of consumer and investors protection across the European Union. Today’s agenda reflects the main activities of the ESA’s current work for achieving better outcomes for consumers and also captures new developments that require special attention from a regulatory and supervisory side.” 

Mario Centeno, President of the Eurogroup, will deliver a keynote speech, followed by three panel discussions that will focus on:

  • net performance of retail products and information to consumers on costs and past performance
  • the regulatory and supervisory approach to Virtual Currencies, as part of the bigger digitalisation agenda; and
  • concerns about whether self-placement can go hand-in-hand with the fundamental principle of investing in the best interest of customers.

More information about the Consumer Protection Day is available here.

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