Luxembourg’s fund industry supports the introduction in new EU retail finance legislation of more lenient ‘opt-up’ criteria for retail clients that would give them the same status as professional clients. At the same time, it opposes the creation of a new category of semi-professional investors.
“We are not in favour of a new category of semi-professional clients as it would lead to a large number of changes to the entire MiFID framework and to significant implementation costs for the financial industry,” the Association of the Luxembourg Fund Industry, or Alfi, has told the European Commission.
The Commission this month closed a consultation on a new package of measures to increase the participation of consumers in capital markets. Brussels plans to present these legislative plans in the fourth quarter of this year.
In its response to the Commission’s call for evidence, Alfi proposed to refine the existing criteria for investors in such a way that more of them can be classified as professionals.
‘Cut the portfolio threshold to 200,000 euro’
Alfi has suggested to reduce the threshold of the client’s portfolio to 200,000 euro from currently 500,000 euro, and to widen the criteria on sufficient financial knowledge to also include recognition of a bachelor or master-level diploma in economics or finance, according to its response to the EU consultation on a new EU retail investment package.
Alfi has proposed that retail clients would no longer need to meet four, but two criteria before they could move to ‘opt up’ and be treated as a professional investor.
For some time and across the European Union, the financial sector has seen a discussion on the status of experienced retail investors as clients. The current framework in essence only distinguishes between retail and professional clients. This distinction restricts the range of investments for retail clients, notably for high-net worth individuals and representatives of family offices that do not qualify as professional investors.
Some countries have introduced for example a special status for representatives of family offices. Since 2013 representatives of family offices in Luxembourg can request a special permission from the country’s financial regulator CSSF so that they can act as professional investors.
BetterFinance: conflict topics ‘obliterated’
Defending the interests of financial services users, Brussels-based NGO BetterFinance said in its response to the call for evidence that it supports EU plans for a broader engagement of retail investors in the plans for a Capital Markets Union, and that the European Commission should not further postpone rolling out its strategy for retail investments.
BetterFinance said however that the European Commission’s narrow focus on financial literacy and the distribution and digitalisation of financial services “obliterates the topics of conflicts of interests”. The NGO called on the Commission not to ignore aspects of biasfree advice, product oversight and governance, the general duty of care and, among others, issues such as collective redress for retail investors, the availability of data, and shareholder rights.