Council of the EU has agreed Retail Investment Strategy (RIS) position

At a glance

On 12 June 2024, the Council of the European Union reached an agreement on its Retail Investment Strategy (RIS) and retail investor package (PRIIPs), position, which the European Commission proposed in May 2023 and the European Parliament adopted in April 2024. The RIS introduces sweeping changes to the banking, insurance and investment management sectors and amends several European regulations, aiming to strengthen the EU's rules on retail investor protection.

A closer look

The Council proposes the following:

1. Inducements

While the Council decided to keep the option of receiving inducements for execution-only sales, it reinforced safeguards to prevent conflicts of interest. Key measures include:

• An inducement test to ensure advisors act in the client's best interest;
• Enhanced transparency of inducements, their costs, and their impact on returns;
• Overarching principles that firms must respect when handling inducements, to ensure they do not disproportionately influence product recommendations or favor related entities; and
• Member States can maintain or introduce stricter requirements on inducements.

The Council agrees that these inducement provisions are reviewed five years after the framework enters into force.
 

2. Value for money

The "value for money" concept ensures retail clients receive fair value from investment products. Under this framework, manufacturers and distributors must assess the costs and charges relative to product performance, benefits, and objectives. The Council agreed that:

• Similar to the European Parliament, benchmarking exercises should not be imposed on financial firms. Instead, to assess value for money, these actors should compare their products to a peer group of similar products within the EU.
• Benchmarks will only remain as a supervisory tool. The European Securities and Markets Authority (ESMA) and the European Insurance and Occupational Pensions Authority (EIOPA) will develop benchmarks to help national authorities identify products that do not offer value for money.
• For their value-for-money assessment processes, Member States can allow financial firms to compare their products with the relevant European Union supervisory benchmark for market comparison, instead of a peer group.

The Council agrees that the value-for-money framework should be reviewed seven years after its implementation.

Next steps

This adoption of both the European Parliament and Council’s positions paves the way for interinstitutional negotiations to begin in order to reach a final text. In light of the European Parliament’s election and reformation, the timetable for the final version’s agreement and formal adoption is yet to be confirmed. However, our timeline estimates when these new rules may go live to help you prepare for these changes: 

Click here to enlarge the timeline

How can Deloitte help

Deloitte’s RegWatch will help you stay tuned to regulatory updates and anticipate regulatory changes impacting your business and organization. Deloitte’s advisory and consulting services can help you:

• Assess how RIS will impact your business;
• Understand the requirements and interpretations of specific amendments;
• Assess and define a business strategy in light of the RIS objectives;
• Perform an impact assessment and gap analysis of your organization; and
• Provide guidance with updating your compliance control framework and policies.