Directive 2021/338 - Amendment of Directive 2014/65/EU as regards information requirements, product governance and position limits, and Directives 2013/36/EU and (EU) 2019/878 as regards their application to investment firms, to help the recovery from the COVID-19 crisis - Main contents

EN

Official Journal of the European Union

L 68/14

The COVID-19 pandemic is severely affecting people, companies, health systems and the economies and financial systems of Member States. In its Communication of 27 May 2020 entitled ‘Europe’s moment: Repair and Prepare for the Next Generation’ the Commission stressed that liquidity and access to finance will be a continued challenge. It is therefore crucial to support the recovery from the severe economic shock caused by the COVID-19 pandemic through the introduction of limited targeted amendments to existing Union financial services law. The overall aim of those amendments should therefore be to remove unnecessary red tape and introduce carefully calibrated measures that are deemed effective in order to mitigate the economic turmoil. Those amendments should avoid making changes that increase administrative burdens on the sector and should leave complex legislative questions to be settled during the planned review of Directive 2014/65/EU of the European Parliament and of the Council (3). Those amendments form a package of measures and are adopted under the label ‘Capital Markets Recovery Package’.

Directive 2014/65/EU was adopted in 2014 in response to the financial crisis that unfolded in 2007 and 2008. That Directive has substantially strengthened the financial system of the Union and guaranteed a high level of investor protection across the Union. Further efforts to reduce regulatory complexity and investment firms’ compliance costs and to eliminate distortions of competition could be considered, provided that investor protection is sufficiently taken into consideration at the same time.

As regards the requirements that were intended to protect investors, Directive 2014/65/EU has not fully achieved its objective to adopt measures that take the particularities of each category of investors, i.e. retail clients, professional clients and eligible counterparties, sufficiently into account. Some of those requirements have not always enhanced investor protection but at times have rather hindered the smooth execution of investment decisions. Therefore, certain requirements set out in Directive 2014/65/EU should be amended to facilitate the provision of investment services and the performance of investment activities, and those amendments should be made in a balanced way which fully protects investors.

The issuance of bonds is crucial in order to raise capital and to overcome the COVID-19 crisis. Product governance requirements can restrict the sale of bonds. Bonds with no other embedded derivative than a make-whole clause are generally considered safe and simple products that are eligible for retail clients. In the event of its early redemption, a bond with no other embedded derivative than a make-whole clause protects investors against losses by ensuring that those investors are provided with a payment equal to the sum of the net present value of the remaining coupon payments and the principal amount of...