Regulating retail investment products: the financial crisis and the EU challenge
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Regulating retail investment products: the financial crisis and the EU challenge Niamh Moloney
Published online: 10 June 2010 © ERA 2010
Abstract This article examines the Commission’s important 2009 initiative on packaged retail investment products in the context of the financial crisis and the EU’s wider efforts to support retail investor engagement. It examines the drivers for the initiative and its risks and benefits. Keywords Investor protection · Financial crisis · EU · Investment products
1 Introduction The financial crisis has unleashed an avalanche of EU regulatory and institutional measures concerning the financial markets. A plethora of initiatives addressing, amongst other issues, bank capital and liquidity,1 remuneration in financial institutions,2 alternative investment fund managers,3 and credit rating agencies4 have been adopted or are underway. Major institutional reform is looming in the form of
1 Primarily in the form of revisions to the Capital Requirements Directive. 2 Commission Recommendation Complementing Recommendations 2004/913/EC and 2005/162 (C(2009)
3177) and Commission Recommendation on Remuneration Policies in the Financial Sector (C(2009) 3159). 3 COM (2009) 207. 4 Regulation (EC) No 1060/2009 (2009) OJ L302/1.
This paper is based on a presentation given by the author at the Academy of European Law Annual Conference on European Banking and Financial Services Law, Trier, 22–23 October 2009. N. Moloney, Professor () Law Department, London School of Economics and Political Science, Houghton St., London WC2A 2AE, UK e-mail: [email protected]
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the proposed new European System of Financial Supervisors, anchored by three new supervisory authorities (the European Securities and Markets Authority, the European Banking Authority, and the European Insurance and Occupational Pensions Authority) and a European Systemic Risk Board. Notions of regulatory competition, limited intervention, and self regulation, all in the ascendant as the Financial Services Action Plan closed in 2005, seem to be washed away. With all this, where is the retail investor or consumer who may have suffered crippling losses over the crisis?5 Retail investor protection questions tend to become sidelined in the face of titanic market upheavals; the preoccupation to stabilize markets and the banking system over the financial crisis has been overwhelming.6 But there are some heartening indications that the retail interest has not been entirely overlooked. In particular, robust intervention is likely to follow with respect to packaged retail investment products (or PRIPS). April 2009 saw the publication of the important Commission Communication on Packaged Retail Investment Products7 and a major and radical recast of the EU’s harmonized disclosure and advice/sales rules concerning investment products is now underway. The Commission commitment to this initiative, which forms part of the wider post-crisis reform agenda,8 appears real. Commissioner Barnier, in his first address to ECOFIN in February 2010,
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