Finance Watch calls on Commission to ignore industry-biased ESMA advice on inducements in MiFID II

Brussels, 6 February 2015 – The European Commission should disregard technical advice received from the European Securities and Markets Authority on the important consumer issue of how retail financial advisors and intermediaries are paid, said Finance Watch, the public interest advocacy group working to make finance serve society.

The advice, which has been drafted by ESMA, sets out how EU member states should implement MiFID II rules on the payment of commissions and fees paid to intermediaries who distribute retail financial products to consumers [1].

Joost Mulder, Head of Public Affairs at Finance Watch said:

“Unfortunately, on this issue ESMA’s Technical Advice reflects the lobbying agenda of parts of the financial industry rather than the needs of consumers. We therefore urge the Commission to disregard ESMA’s advice in this area and make sure that the final rules respect the consumer protection ambition of the European Parliament and Member States as agreed in the Level 1 legislative texts.”

Finance Watch agrees with the analysis of The European Consumer Organisation BEUC, in its press release issued today.

According to BEUC, if the recommendations made by ESMA were to be followed:

  • Bank staff and financial intermediaries could continue receiving commissions while only making marginal efforts to comply with a key MiFID II requirement that commissions (inducements) would only be allowed if they “enhance the quality” of the investment service. If enhancing the quality of service could be as little as sending an annual performance statement as the final ESMA recommendation suggests, the problem of potentially biased advice would not be tackled [2].
  • Consumers would not be told if their investment advice would be on an independent or non-independent basis. This is important information because “independent advisors” can no longer accept commissions or must pass them on to the client [3]. Therefore such advice is not prone to detrimental bias favouring investment products which are financially attractive to bank staff but much less for the client.

Monique Goyens, Director General of The European Consumer Organisation BEUC, commented:

“Roughly 60% of all investment products sold to consumers do not cater for their needs [4]. This situation will not improve if regulators give in to industry pressure to maintain the status quo. The EU directive on financial markets contains useful measures to repair some of the flaws related to commission-based investment advice. Now the Commission needs to ensure that when these laws are being implemented those timid advances are not rolled back just to please industry.”

[1] The revision of the Markets in Financial Instruments Directive (MiFID II), which was officially concluded in June 2014, is currently being transposed by EU governments. The European Commission, on the basis of advice from the European Securities and Markets Authority (ESMA), is tasked with providing implementation guidelines. The draft technical advice can be downloaded from

[2] Under MiFID II inducements or commissions must be “designed to enhance the quality of the relevant service to the client” and not impair honest, fair, professional advice “in accordance with the best interest” of the client. ESMA has been mandated to specify this obligation.

[3] While ESMA’s first draft recommendation dated 22 May 2014 provided that non-independent advice should be declared as such, the final version modified its stance by taking“potential negative connotations to non-independent advice” (page 105, paragraph 3 of the final Technical Advice) into account. This is a violation of Article 24(4)(a)(1) of MiFID, which stipulates that firms must disclose “whether or not the advice is provided on an independent basis”.


Go to All press