The new rules proposed by the European Commission should empower retail investors--meaning individual, non-professional, “consumer” investors--to invest safely and to benefit from the EU’s capital markets union. The capital markets union, launched by the European Commission in 2015, is meant to get capital “flowing” across the EU.

The aims to help channel private funding into the EU’s economy and to support the green and digital transitions. It includes a directive that revises existing rules in several directives, such as the Markets in Financial Instruments Directive (Mifid II), the Undertaking for Collective Investment in Transferable Securities (Ucits) Directive or the Alternative Investment Fund Managers Directive (AIFMD), amongst others.

Details of the package

New measures in the package have several objectives, noted the European Commission. They aim to:

- improve the way information is provided to retail investors about investment products and services, making it more meaningful and standardised

- increase transparency and comparability of costs

- ensure that investors have a clear view of the performance of their investment portfolio

- ensure that financial advice is aligned with retail investors’ best interests

- protect retail investors from misleading marketing, including on social media or via celebrities, by making financial intermediaries fully responsible for the use and misuse of marketing communications

- improve people’s financial literacy

- make the eligibility criteria to become a professional investor more proportionate

- enhance cooperation to make sure rules are effectively and consistently applied across the EU

“Raising the bar”

“This is the most ambitious legislative proposal since the inception of EU financial regulation. It aims to ensure that the financial framework works in the interest of retail investors. This initiative looks at all stages of the investment process and across all sectors of the EU’s capital markets, and proposes a comprehensive framework to support EU citizens in their investment decisions. We want to encourage European citizens to make their money work for them by channelling part of their savings towards investing,” said Mairead McGuinness, commissioner for financial services, financial stability and capital markets union.

The new initiative will help to unlock the investment potential of Europeans’ savings, as well as make sure they are informed and protected, added McGuinness.

“European consumers are not yet getting the best deal when it comes to their investment choices. This matters if we want to stimulate private investment to fund the wider EU economy. This is why we are today raising the bar in terms of providing expert, unbiased and uncomplicated advice for investment products, so people get the best return on their money,” said Valdis Dombrovskis, the European Commission’s executive vice-President for an economy that works for people.

In the context of “retailisation” of private assets

The new retail investor rules from the European Commission follow the on 9 April 2023. Amongst other changes, the new regulation removes minimum investment thresholds for retail investors and simplifies access to private assets. --will allow more investors to invest in long-term infrastructure. Rules to protect retail investors, therefore, will be important to consider in this context.