The European Council announced a provisional agreement with the European Parliament on an updated EU retail investment framework that modernises and aligns investor protection rules across sectors and distribution channels. The package centres on stronger cost and disclosure requirements, tighter controls on inducements and marketing, targeted simplifications to the suitability process for certain products, and revised criteria for treating more retail investors as professional clients. Under the “value for money” approach, retail investment firms will have to identify and quantify all investor-borne costs and charges for the products they advise and assess whether total costs are justified and proportionate, using agreed standards including product peer groupings under the Markets in Financial Instruments Directive, the Undertakings for Collective Investment in Transferable Securities Directive and the Alternative Investment Fund Managers Directive, and supervisory benchmarks under the Insurance Distribution Directive, including national benchmarks introduced over a four-year period from entry into force. Products with unjustified or disproportionate costs should not be approved for sale. Standardised product information, including Key Information Documents, will be enhanced with updated templates developed by the relevant European supervisory authorities, and 30 months after the entry into force of the new PRIIPs rules KID information must be provided in a machine-readable format. The text strengthens inducement rules by requiring firms and advisers to act in clients’ best interests, ensure inducements deliver a tangible client benefit, and disclose inducement costs clearly and separately, while keeping scope for member states to introduce inducement bans. For recommendations limited to diversified, non-complex and cost-efficient instruments, advisers will no longer need to assess clients’ investment knowledge and experience as part of the suitability assessment. The agreement also encourages member-state action on financial literacy, addresses marketing standards, and highlights risks from financial influencers. Retail-to-professional opt-up criteria are adjusted, including revised transaction tests, a lower portfolio threshold of an average above EUR 250,000 over the last three years, and an alternative education or training criterion, subject to specific combination limits. Technical work is expected to finalise the legal texts early in 2026. Member states must transpose the new rules 24 months after publication in the EU Official Journal, with application 30 months after publication, except for the new PRIIPs rules, which would apply 18 months after publication.
European Council 2025-12-18
European Council and European Parliament agree updated retail investment framework with value for money tests and tougher inducement and disclosure rules
The European Council and European Parliament reached a provisional agreement on an updated EU retail investment framework, enhancing investor protection rules. Key measures include stronger cost and disclosure requirements, tighter inducement controls, and simplified suitability processes for certain products. The framework also revises criteria for retail-to-professional client opt-up and mandates enhanced product information standards.