Financial Services

Funds Legal Update | 19 March 2019

Published on 18th Mar 2019

Welcome to our new Funds Legal Update.


This week, we take a look at ESMA's report on retail investment products and the applicable MiFID II provisions which highlight the significance of product costs.

We highlight sustainability and the political agreement now reached on the proposals covering transparency obligations.

Finally, we report on a call for clarity from the Joint Committee of ESAs to the European Commission on the application of the KID.

ESMA's priorities for asset management: retail investment products

On 6 March 2019, ESMA Chair Steven Maijoor gave a keynote speech on ESMA's priorities for the asset management community. In his speech, Mr Maijoor focussed on products and PRIIPs and findings made under ESMA's first annual costs and performance report on retail investment products. The speech emphasised the following:

  • Costs and performance of retail investment products (UCITS, retail AIFs, SRPs), and the goal of stronger participation of retail investors in capital markets.
  • Passive vs active equity funds: ESMA's report found that, after costs, the passive equity funds consistently outperform active equity funds.
  • The duty to act in the best interests of clients, and MiFID II product governance obligations.
  • The importance of cost disclosure in the context of PRIIPs.

MiFID II provisions on suitability and product governance emphasise the importance of analysing product costs. However, MiFID II rules on costs differ from the PRIIPS framework.

This speech contains relevant information on different regulatory regimes impacting costs and ESMA's thinking in terms of plans to pay greater attention to costs.

Disclosures on sustainability: proposed regulation

On 7 March 2019, the European Council published a press release announcing that a political agreement had been reached on proposals relating to the regulation and sustainability risks. The proposals introduce transparency obligations on how financial companies integrate ESG factors into their investment decisions.

The political agreement will now be submitted to EU ambassadors for endorsement, after which it will be subject to a legal linguistic revision.

Quick fix to PRIIPs: clarification for multi-option products

On 8 March 2019, the Joint Committee of ESAs released a letter sent to the European Commission, proposing draft Regulatory Technical Standards changes to clarify the application of the key information document to multi-option products. The ESAs have asked that the issue is addressed as soon as possible to ensure clarity by the end of 2019.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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