EU regulators to examine charges, performance transparency
EU regulators are embarking on a large-scale study of costs and performance reporting of retail investment products, the chair of the European Securities and Markets Authority (ESMA) said today.
Opening ESMA’s first conference, its chair Steven Maijoor said it would be working on the study with the other two European supervisory authorities, based on a mandate from the European Commission.
The aim of the study was to increase investors’ awareness of the net return of investment products, and the impact of fees and charges.
Implementation of MiFID II and the regulation on EU packaged retail and insurance-based investment products provided the right framework for the study, said Maijoor.
For securities markets ESMA will initially focus on the costs and performance of UCITS funds.
“In that context, we will also look into the differences between active and passive investing, and the impact on costs and charges, and long-term return,” Maijoor said.
For a couple of years now the Commission has been saying it would ask the EU supervisory authorities to work on the transparency of long-term retail and pension products. Maijoor’s comments indicated the Commission has followed through with this.
Brussels-based lobby group Better Finance last week urged EU policymakers to take up this work if they really wanted to close the pensions savings gap.
Maijoor also spoke about Brexit in his speech. Repeating comments made to EU lawmakers last week, he said ESMA had requested contingency plans from credit rating agencies and trade repositories to mitigate risks associated with the UK withdrawing from the EU.
However, “the UK will not become your average third country,” he said. “It is worth remembering that today the UK makes up about two-thirds of EU equity trading, while representing around a tenth of the EU’s population.
“This will not change in the near future, and business ties with London and the rest of the world will remain.”
He said he therefore welcomed the Commission’s proposals “for EMIR 2.2 and the ESMA regulation in relation to the centralisation of third country supervision”. The arrangements proposed under the former were too complex, however, he said.
In the summer the Commission proposed that any euro clearing house deemed systemically important would become subject to regulation by ESMA, and that any such organisation considered to be especially important would be required to do business in the EU.
More recently, it issued a set of proposals to reform the European supervisory authorities, which included enhancing ESMA’s powers.
Maijoor said: “ESMA can play a strong, central role in the future as a single access point for third country entities and ensure consistent supervision of those entities across the EU.”