Final negotiations between the EU Parliament and the Council on future EU rules for retail investors (Retail Investment Strategy) will not continue until the second half of the year. The current Polish EU Council Presidency has canceled the so-called trilogue scheduled for June 3, and announced that it no longer wishes to actively advance the dossier under its leadership. The Poles will now pass the legislative process on to the Danes, who hold the EU Presidency from July onwards. „Given the differing views among member states on how to simplify the text, the Presidency has concluded that the options are not yet sufficiently developed for the Council to adopt a definitive position“, an internal communication to representatives of the member states reads. Therefore, it was deemed not sensible to meet again with the EU Parliament negotiators at this point.

The retail investor rules include requirements for providers of financial products. These include rules intended to ensure appropriate value for money, among other things through comparisons with similar financial products (benchmarking), and increased cost transparency. Measures to improve financial education are also planned. Originally, the EU Commission had proposed a ban on commissions for advisory-free distribution of financial products („execution only“). However, this partial commission ban was removed from both the Council’s and Parliament’s versions.

Not only for this reason, the Retail Investment Strategy is among the most controversial legislative proposals in the EU. A few weeks ago, the EU Commission surprised with a cryptic statement when presenting its roadmap for the Savings and Investment Union: „The EU Commission will facilitate an agreement between Parliament and Council on the Retail Investment Strategy. However, the Commission will not hesitate to withdraw the proposal if the negotiations fail to achieve the strategy’s intended objectives.“ Since then, it remains unclear whether the retail investor package will actually be adopted.

To advance the legislative process, the EU Commission, as well as the French in cooperation with the Czechs and also the Dutch, have recently made extensive proposals to simplify the rules. These considerations are currently being debated – with controversy –in the responsible Council working groups. For example, the EU Commission has proposed that the peer-group comparisons foreseen in the law should only be based on publicly available data. The Dutch advocate waiving the requirement to collect comprehensive information on the financial situation of certain clients, for example when only a relatively small portion of total income is to be invested. The French and Czechs have proposed, among other things, to drop the requirement that advisors must verify the client’s ability to absorb financial losses.

Despite these proposed changes, the RIS is viewed very critically by the financial industry. „The EU Commission should finally have the courage to withdraw the Retail Investment Strategy“, demands, for example, the German Investment Funds Association (BVI). The German Banking Industry Committee's verdict is no more favourable: the retail investor strategy must become significantly simpler – or be shelved.