Brussels (EFE) if they break the rules.
The Community Executive also proposes prohibiting investment firms from paying incentives to commercials or advisors for selling a certain product, but only in some specific types of sales, despite the fact that initially it had been considered to completely veto this practice due to the risk of inciting placing customers with products that are too expensive or risky for their profile.
Both measures are part of the Retail Investment Strategy presented by the Commission to encourage retail clients to invest in the capital markets, somewhat less frequently in the European Union than in other parts of the world, and to ensure that they do so well informed about the options, costs and risks.
“Despite the fact that the EU has one of the highest savings rates in the world, Europeans are more reluctant to invest in financial products,” said the vice president of the Community Executive Valdis Dombrovskis, who attributed it to a lack of confidence or adequate information. and “unjustifiably high” costs for retailers, among other reasons.
Regulation of financial services advertising
Brussels proposes to regulate for the first time the advertising of financial services through the so-called “finfluencers”, people with hundreds of followers on social networks who recommend investment products, sometimes high risk -such as cryptocurrencies, forex, CfDs- and without have specialized knowledge.
The European Commission wants them to have to provide clear, non-misleading information that also reflects the risks and benefits of the product in question in a “balanced” way. “It should not look like clothing or footwear advertising,” explain sources from the institution.
In the event that the “influencers” fail to comply, Brussels proposes that the company that hires them be the one to answer for them, so that they would be exposed to fines or even the withdrawal of the license if there is an infraction.
The national authorities will be in charge of monitoring and deciding the sanctions on a case-by-case basis, taking into account, for example, the seriousness of the infringement, whether they are repeated or the company’s billing.
Thus, the firms that hire “influencers” who will have to verify that their ads comply with European regulations and keep documentation of all the campaigns they have carried out so that the authorities can examine them when they receive complaints.
Regulation in France
Some European countries, the latest France, have already regulated a phenomenon that is generating more and more complaints from consumers who have lost money, according to a study published by the Dutch Financial Markets Authority, which found that many of these “finfluencers” recommend products high-risk or work with unlicensed firms.
On the other hand, the proposal seeks to tackle possible conflicts of interest when a commercial receives incentives for selling a financial product, although for the moment Brussels only proposes to prohibit them in “direct execution sales”, that is, when there is no prior advice.
For the rest of the cases, it proposes new safeguards to guarantee that the adviser acts in the “best interest” of the client and establishes criteria to evaluate it: that it offers a range of products adapted to their needs and demands, that they are efficient in terms of their cost , and that do not contain additional elements that are unnecessary for the objectives of the client and have a cost (for example, unsolicited life insurance).
The Commission will review the situation in three years and decide whether to move towards a complete ban on incentives.
Investment funds and insurers had opposed this veto, arguing that it would reduce the options for clients to receive financial advice, while consumer organizations are calling for their abolition.
The Commissioner for Financial Services herself, Mairead McGuinness, pointed out at the beginning of the year that products where there are incentives are on average 35% more expensive and that their ban in the Netherlands and the United Kingdom had led to “a shift towards products less expensive and more diverse”.
The entry Brussels wants to put a stop to the “influencers” that advertise financial products was first published in EFE Noticias.
