The chair of the European Securities and Markets Authority (Esma), Verena Ross, has struck a cautious tone on proposals for the EU to develop a new “basic and simple investment product” for retail investors, while making clear that the authority still believes that such a product could help convince more European savers to start investing.
Speaking at the Efama Investment Management Forum, Ross acknowledged concerns from the industry that such a product could “cannibalise” the Ucits framework, which she described as a “global success story” that has demonstrated its ability to adapt to market challenges.
Ross made clear that Esma still supports the idea of ‘basic and simple’ investment product. Ucits products, she said, do not necessarily provide the simplicity that European savers would expect from an investment product.
“I would challenge a bit whether all Ucits are simple,” Ross told the audience of European asset managers in Brussels. “It’s about carefully considering what we actually mean by ‘simple,’ as the term can lead to quite complex discussions.”
In a May, in a contribution to the discussion on European capital markets, Esma said such a “basic and simple” EU investment product label could work as a voluntary label to make markets more accessible to retail investors and could guide inexperienced investors toward cost-efficient options.
Industry worries it stiffle innovation
Sandro Pierri, CEO of BNP Paribas Asset Management and chair of Efama, voiced reservations about the proposal, emphasising the risk of oversimplification at the expense of market diversity and innovation. Pierri argued that the Ucits framework already provides sufficient flexibility to cater to a wide spectrum of investor needs while maintaining robust investor protections.
“Creating yet another product could dilute the reputation and trust that the Ucits label has built over decades,” Pierri said. He also highlighted the industry’s responsibility to innovate within existing structures to meet the evolving needs of retail investors, rather than pursuing solutions that might inadvertently undermine existing successes.
Pierri called for the focus to remain on educating retail investors and streamlining their journey, suggesting that efforts should be directed toward improving financial literacy and accessibility rather than reinventing the product landscape.
Need for better definitions
The idea for a simple, low-cost investment product originated with former Italian prime minister Enrico Letta, who published his ‘More than a market’ report on financial sector reforms in April. It was endorsed earlier this month by Maria Luís Albuquerque, the new EU financial services commissioner, during her European Parliament hearings. Albuquerque called it a promising tool to boost retail investor participation.
Europe’s top financial regulator shares the concerns voiced by the industry. Ross noted that terms like “high risk, low risk” or “complex, non-complex” have already been defined in various pieces of EU legislation.
“The driver behind Letta’s proposal is the belief that regulators need to carefully consider how to ensure retail investors are not just ‘brought into the capital market,’ but that the way they interact with it is feasible for them,” Ross said. “They need the right support and a mix of products that allows them to engage easily in the capital markets.”
Moving toward T+1 settlement
Alongside the debate on retail investment reforms, Ross called for the EU to transition to a T+1 securities settlement cycle, arguing it will boost the efficiency and competitiveness of European capital markets. Esma has recommended to EU policymakers that the bloc should move to a T+1 standard—where trades are settled the day after they are executed— on 11 October 2027.
“The transition to T+1 will bring significant benefits for the capital markets,” Ross said.
However, she acknowledged industry concerns about the challenges of implementing such a move. “This will require significant technological investment and changes in processes across the post-trade ecosystem,” she warned.
Pierri echoed these sentiments, urging policymakers to provide a realistic timeline for industry participants to adapt. “The move to T+1 is not just about regulatory changes. It demands a complete overhaul of current operational practices and a substantial commitment to infrastructure upgrades,” he said.
Esma still sees potential systemic risks in Eltifs
On financial stability, Ross highlighted how recent regulatory updates, including changes to the Ucits, AIFMD, and Eltif frameworks, have made a “broad set of liquidity management tools” available to fund managers.
However, she expressed concern about the European Commission’s decision not to retain Esma’s proposal for redemption notice periods in Eltifs, warning that this “might be a source of future investor and systemic risk.”
(The headline and first four paragraphs of this article were updated on 28 November to better reflect that Esma still sees merit in a basic and simple investment product for investors.)
Further reading on Investment Officer Luxembourg:
- Esma proposes EU label for ‘basic’ investment products
- EU faces significant investment crisis, report warns
- Esma faces uphill battle to emerge as European SEC