20.4 C
Thursday, September 28, 2023
EconomyESMA: Recommendations to improve investor protection

ESMA: Recommendations to improve investor protection

DISCLAIMER: Information and opinions reproduced in the articles are the ones of those stating them and it is their own responsibility. Publication in The European Times does not automatically means endorsement of the view, but the right to express it.

DISCLAIMER TRANSLATIONS: All articles in this site are published in English. The translated versions are done through an automated process known as neural translations. If in doubt, always refer to the original article. Thank you for understanding.

News mostly coming from official institutions (officialinstitutions)
[td_block_21 category_id="_more_author" limit="4" m16_el="0" m16_tl="15" custom_title="More from the author" block_template_id="td_block_template_17" speech_bubble_text_size="9" subtitle_text_size="12" header_color="#c6c6c6" header_text_color="#000000"]

The European Securities and Markets Authority (ESMA), the EU securities markets regulator, today advises the European Commission on certain aspects relating to retail investor protection. In the advice ESMA puts forward proposals that will make it easier for investors to get the key information they need to take well-informed investment decisions, whilst also protecting them from aggressive marketing techniques and detrimental practices.

Verena Ross, ESMA Chair, said:

“Increased retail participation in financial markets provides opportunities both for savers and for companies seeking financing, and we are encouraged to see that digital trends and new business models are contributing to making investing more accessible to the general public.

These developments do not however come without risk. Gamification techniques in trading apps and personal recommendations on social media may cause retail investors to engage in trading behaviour without understanding the risks involved. We are therefore setting out a number of proposals to ensure that these developments do not compromise investor protection in the EU”.

The proposals put forward aim at maintaining a high level of investor protection, while ensuring that retail investors can benefit from digitalisation opportunities.  The recommendations relate to, among others:

  • requiring machine readability of disclosure documents to facilitate the development of searchable databases available to the public;
  • addressing information overload by proposing to define what is vital information and by using digital techniques such as layering of information;
  • development of a standard EU format of information on costs and charges and aligning the disclosures under MiFID and the PRIIPs KID;
  • possibility for NCAs and ESMA to impose on firms the use of risk warnings for specific financial instruments;
  • addressing aggressive marketing communications; and
  • addressing issues related to misleading marketing campaigns on social media and the use of online engagement practices, such as the use of gamification techniques by firms or third parties.

In addition, ESMA also supports the Commission’s proposal to prohibit the receipt of PFOF to adequately address the serious investor protection risks arising from this practice.

Next steps

The advice has been submitted to the European Commission.

- Advertisement -
- Advertisement -
- Advertisement -
- Advertisement -

Must read

Latest articles

- Advertisement -