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Regulation Impacted

Topic

Impact from RIS

RIS Omnibus

Customer protection v

Financial advisors have a responsibility to provide advice based on a suitables range of financial products that align with the needs of their clients or customers. When selecting the range of products, advisors should consider the business model of the firm and the investment objectives of the client or customer.

After identifying suitable instruments for their clients' and customers' needs, advisors should recommend the most cost-efficient product among comparable options. This recommendation should consider factors such as performance, risk level, qualitative elements, and costs and charges reported. If advisors choose to recommend a similar product with higher costs, they should clearly provide objective justification for such a recommendation and keep a record of that justification. If none of the available products are in the best interest of the client or customer, financial advisors should refrain from providing advice or making a recommendation.

 

RIS Omnibus

Product Benchmark

To facilitate the development of reliable benchmarks by ESMA and EIOPA, manufacturers and distributors of investment products must report necessary data to competent authorities, who would then transmit the data to ESMA and EIOPA.

 

RIS Omnibus

Product Benchmark

ESMA and EIOPA should collaborate with national competent authorities to establish harmonized European benchmarks for products that are manufactured and distributed across multiple EU Member States. These benchmarks will serve as exclusive supervisory tools for national competent authorities to evaluate the qualitative and quantitative characteristics of products and identify any potential market outliers. For products that are exclusively manufactured and distributed within a single Member State, national competent authorities should develop benchmarks based on the regulatory technical standards guidelines provided by ESMA and EIOPA.
As part of the requirements for product governance, manufacturers and distributors of packaged retail investment products should perform peer-grouping evaluations of their financial instruments.
National competent authorities should be granted the necessary powers to take corrective actions as needed. These actions may include requesting justifications for any deviations, ensuring compliance with product governance requirements, and, if required, removing a product from the market as a last-resort measure.

 

RIS Omnibus

Minimum Standards for Knowledge and Competence in Financial Services

Minimum common standards for knowledge and competence requirements should be established. Member States should mandate that investment firms, insurance and reinsurance distributors, and their respective employees have the necessary knowledge and competence to fulfill their obligations when providing investment advice. This assurance of knowledge and competence should be demonstrated through a certificate or recognized document issued by the Member State or the European Union.

 

RIS Omnibus

Disclosure requirements

When an investment firm or insurance intermediary provides services to clients in another Member State, they must provide basic information on those services to their competent authority except if they have under 50 clients. Competent authorities should share this information with ESMA and EIOPA.

 

RIS Omnibus

Disclosure requirements (Costs)

Retail investors should have access to clear and timely information about costs, associated charges, and third-party payments before making an investment decision. Regulatory technical standards should be implemented to specify and harmonize the content and format of disclosures, including the use of standard terminology, brief and concise explanations, and the calculation methodology for determining the percentage of overall costs.

 

RIS Omnibus

Annual Statements for Retail Clients and Customers

Financial service providers should provide their retail clients and customers with an annual statement that offers a comprehensive overview of their financial holdings. This statement must detail the various financial products held, including associated costs, charges, and third-party payments. It should also outline all payments received or paid by the client throughout the year, such as dividends and interest.

RIS Omnibus

Marketing communication

Competent authorities should have access to relevant information on marketing communications and practices to fulfill their supervisory and enforcement duties and protect consumers. Investment firms should maintain records of marketing communications provided or made accessible to retail clients or potential clients, including any related elements deemed important by competent authorities, at least for the duration of their relationship with the client or customer.
Where an investment firm uses the services of a third party that is remunerated or incentivised through non-monetary compensation by such investment firm, in order to promote investments in one or several financial instruments or the use of investment or ancillary services, and where such third party carries out such promotion through public social media platforms (“finfluencer”), the investment firm shall comply with the following obligations:
(a) it shall establish a written agreement with the finfluencer determining the nature and scope of the activity to be carried out on behalf of the firm;
(b) upon request, it shall provide the competent authority with the identity and contact details of all finfluencers whose services it relies on;
(c) it shall regularly check that the activity of the finfluencers whose services it relies.

 

RIS Omnibus

Suitability Test

To ensure portfolio diversification is adequately considered in advised services, financial advisors must systematically assess the needs for diversification for their clients or customers during suitability assessments. Results of suitability assessment shall be provided to the client before the conclusion of the transaction.

 

RIS Omnibus

Suitability Test

It is required to gather broader set of information to assess suitability. This includes not only assessing clients' knowledge and experience with financial instruments but also obtaining additional details for retail clients or customers such as their capacity to withstand full or partial losses, risk tolerance, investment needs and objectives, as well as their preferences regarding sustainability. If an appropriateness assessment indicates that a financial product or service is unsuitable for a client or customer, an investment firm or insurance intermediary should refrain from proceeding with the transaction unless explicitly requested by the client or customer.

 

RIS Omnibus

Complex product requirements and client Knowledge

To ensure consistency across the EU, investment firms, insurance undertakings, and insurance intermediaries must identify and provide warnings for risky or complex investment products. ESMA and EIOPA will establish technical standards for the content and format of these risk warnings. Moreover, Member States should empower competent authorities to mandate the use of risk warnings for specific investment products.
Additionally, it is the responsibility of each Member State to enhance the level of financial education in their education systems. Member States should demonstrate a strong commitment to fulfilling the obligations set out in the Directive by taking ambitious steps in this regard.

 

RIS Omnibus

Client Knowledge

Clear and specific criteria should be established to assess client knowledge, taking into account their level of experience, expertise, and understanding of financial products and services. The criteria should also consider the client's experience in the financial services sector.

1286/2014 EU
(PRIIPs Level 1)

Page limit

The page limit of the KID is extended from 3 to 4 pages.

1286/2014 EU
(PRIIPs Level 1)

New section "Product

at a glance"

In order to make the KID easier to read and more consumer friendly a new section “Product at a glance” is added containing the following information:
- type of the product
- summary risk indicator
- total cost of the PRIIP
- recommended holding period
- existence of insurance benefits set out in the PRIIPs Regulation
- whether the PRIIP offers financial guarantees

 

1286/2014 EU
(PRIIPs Level 1)

Comprehension Alert

The standarzied comprehension alert is removed from the KID. Instead, appropriate warnings consistent with MiFID II and IDD shall be shown in the KID.

1286/2014 EU
(PRIIPs Level 1)

Online comparison tool

In order to provide the possibiliy to the retail investor to compare various products, ESMA and EIOPA, in cooperation with the NCAS, are requested to develop an independent online comparison tool for PRIIPs.
This tool shall at least cover information related to performance, risk, recommended holding period and cost data. It should also mention qualitiative feautures.
The online tool shall be available at the latest 12 months after the key information documents are available on the European Single Access Point.
The reference to the online comparison tool shall be added to the KID. Moreover management companies, investment firms and insurance intermediaries shall promote the use of the online fund comparison tool on their websites, including in relevant marketing material.

 

1286/2014 EU
(PRIIPs Level 1)

Removal of ESG information from the what's the product section

 

Information on sustainibillity aspects is removed from the "What's the product section" as there will be dedicated section on that topic.

1286/2014 EU
(PRIIPs Level 1)

Performance scenarios

By adjusting the Artcile 8(3) requesting appropriate information "on performance" instead of "on performance scenarios", ESAs provide the possibility to include past performance if future looking performance scenarios could be missleading. This is expected to be the case for a limited number of products.

 

1286/2014 EU
(PRIIPs Level 1)

Dedicated section on Sustainibility aligned with SFDR

Instead of including information on sustainibility aspects in the "What's the product" section, the KID is enriched by a specific section "How environmentally sustainable is this product?".

The new section will as well include key figures which are calculated in accorddance with SFDR such as
(i) the minimum proportion of the investment of the PRIIP that is associated with economic activities that qualify as environmentally sustainable
(ii) the greenhouse gas emissions intensity associated with the PRIIP
(iii) whether, in relation to the PRIIP, the PRIIP manufacturer considers principal adverse impacts of investment decision on sustainability factors

Products falling under SFDR Article 8 or 9 shall as well include the link to the relevant SFDR disclosures under this section. Information presented under the new Sustainibility Section is expected to be consistent with disclosures made in accordance with SFDR.

 

1286/2014 EU
(PRIIPs Level 1)

Digitalization:
Introduction of an interactive tool

The electronic format of the KID may be provided by means of an interactive tool which shall be easy to read and understand and may allow as well displaying information based on personal preferences.

It needs to be easily accessible through a link on the KID and need to contain a recommendation to download and store the data.

1286/2014 EU
(PRIIPs Level 1)

Digitalization:
Introduction of an interactive tool

After consumer testing, ESAs shall develop draft RTS to personalize information provided via the interactive tool. It should be possible to simulate cost for other holding periods than then recommended holding period.

1286/2014 EU
(PRIIPs Level 1)

Digitalization:
Layered format of the KID

The KID can be presented in a layered format. In that case the "product at a glance" section shall appear in the first layer.

1286/2014 EU
(PRIIPs Level 1)

Storage of the KID

The KID is expected to remain easily and publicly accessible on the website of the PRIIPs manufacturer on the website of the PRIIPs distributor.
It has to be possible to download the KID for the time the retail investor may need to consult it.
If the KID is not available on the website of the distributor it shall be provided upon request within 2 business days.


If a KID was updated previous versions shall be provided to the retail investor upon request.

2009/65/EC
(UCITS Directive Level 1)

Undue costs

Management companies must prevent undue costs to UCITS and its unit-holders. Costs are considered due if they align with prospectus disclosures and are necessary for UCITS' operations or compliance with legal requirements.

2009/65/EC
(UCITS Directive Level 1)

Undue costs

Management companies must maintain and review an effective pricing process, ensuring costs are justified and proportionate to the value delivered and UCITS' characteristics.

2009/65/EC
(UCITS Directive Level 1)

Undue costs

The pricing process must be clearly documented, detailing responsibilities and including objective criteria and market comparisons for cost assessments

2009/65/EC
(UCITS Directive Level 1)

Undue costs

Management companies must annually assess if undue costs were charged and reimburse those without delay, also reporting such instances to the relevant NCAs

2009/65/EC
(UCITS Directive Level 1)

Undue costs

Management companies must annually assess costs allocation

2009/65/EC
(UCITS Directive Level 1)

Undue costs

Management companies must specify minimum requirements for the pricing process, including proper identification and quantification of costs, conflict of interest identification, and compensation procedures for undue costs

2009/65/EC
(UCITS Directive Level 1)

Costs reporting

Management companies must report on costs and performance of UCITS to the competent authority, detailing the costs at the level of each fund or share class where relevant

2009/65/EC
(UCITS Directive Level 1)

Benchmarking

NCAs must carry out regular checks of the alignment of monetary and non-monetary benefits of UCITS with benchmarks, and corrective actions when necessary

2009/65/EC
(UCITS Directive Level 1)

Undue costs

RIS introduces a requirement to compensate investors where undue costs have been charged or costs miscalculated, considering technical and operational proportionality

DIRECTIVE 2011/61/EU
(AIFMD Level 1)

Undue costs

AIFMs are required to prevent undue costs being charged to AIFs and their unitholders. Costs are considered due if they adhere to disclosed amounts in official documents and are necessary for operational or compliance purposes.

DIRECTIVE 2011/61/EU
(AIFMD Level 1)

Undue costs

AIFMs must maintain and review a pricing process that justifies the costs borne by AIFs, ensuring these costs are proportional to the value delivered to unitholders and aligned with AIF characteristics

DIRECTIVE 2011/61/EU
(AIFMD Level 1)

Undue costs

The pricing process must be documented clearly, assigning specific responsibilities for cost determination and review, with periodic evaluations based on objective criteria

DIRECTIVE 2011/61/EU
(AIFMD Level 1)

Undue costs

AIFMs must annually assess and promptly reimburse undue or miscalculated costs, reporting these incidents to appropriate authorities.

DIRECTIVE 2011/61/EU
(AIFMD Level 1)

Undue costs

The Commission will specify criteria and measures to ensure AIFMs comply with obligations to prevent undue costs, including detailed pricing process requirements and conflict of interest mitigation.

DIRECTIVE 2011/61/EU
(AIFMD Level 1)

Undue costs

IFMs must report detailed costs and performance data for each AIF or its share classes to the competent authority.

DIRECTIVE 2011/61/EU
(AIFMD Level 1)

Undue costs

NCAs must carry out regular checks of the alignment of monetary and non-monetary benefits of AIFs with benchmarks, and corrective actions when necessary

MiFID II

Product governance

Member States must ensure that investment firms that manufacture investment products have appropriate product approval processes in place, including target market identification, type of targeted client (knowledge, ability to bear losses, etc.), risk tolerance, justification that the product meets the target markets' needs and expectations, identification of relevant risks and appropriateness of the proposed distribution strategy, identification of all costs and charges and their justification, and justification that the product serves the clients' best interests.

MiFID II

Product governance

Member states need to consider the following when complying with product governnace requirements:
-  The financial instrument's costs and charges shall be compatible with the objectives of target market
-  Where an investment firm manufactures or distributes financial instruments falling under the definition of packaged retail products it shall perform a peer-grouping analysis
In addition, this new section provides further details on how the peer-grouping analysis must be performed.

MiFID II

Inducements

Where  investment firms are subject to an inducement ban, the conditions of Article 24 shall be deemed fulfilled. The national competent authority might reverse this presumption if an investment firm does not comply with the article.

 

MiFID II

Independent advice

Addition of a new limit of EUR 100 per annum for the consideration of what constitutes an incentive for the firm to not consider the best interests of the client. When minor non-monetary benefits are below EUR 100 per annum or of a scale and nature such that they could not be judged to impair compliance with the investment firm’s duty to act in the best interest of the client, and provided that they have been clearly disclosed to the client, products are exempted from independence analysis.

 

MiFID II

Independent advice

When providing investment advice to retail clients on an independent basis, the investment firm may limit the assessment in relation to the type of financial instruments to well-diversified, cost-efficient and non-complex financial instruments.

 

MiFID II

Information to be reported when providing cross-border services

Investment firms should provide annual reports to the relevant supervisory authorities when providing cross-border services, including: the list of Member States in which the firm is active, the type, scope and scale of services provided, the total number and category of served clients per Member State, the number of received complaints, and the type of marketing communications used.

Prudential and risk management

ESG / Sustainability
 

  • Swiss Climate Scores
    On 29 June 2022, as part of its ambition to position the Swiss financial center as an international leader in credible climate transparency, the Swiss Federal Council launched the Swiss Climate Scores.

Governance & Markets
 

Digital & Cyber
 

ESG / Sustainability

Governance & Markets
 

Digital & Cyber
 

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