Building a Capital Markets Union with Retail Investors at its Heart – 13th May 2015

The Wealth Management Association (WMA) has submitted its response to the European Commission Green Paper on building a Capital Markets Union (CMU) in which it calls for the retail investor to be put at the heart of the CMU. The response underlines our belief that improving the lives of individuals and their families should be the core objective of the CMU, and that concern for the retail investor should therefore be its central focus. We have developed six key principles to achieve this:

1. Retail investors must lie at the heart of the CMU;
2. Retail investors and intermediaries must be allowed to choose appropriate products for retail investment, through appropriate routes to market;
3. The CMU must appropriately differentiate between different financial sectors, markets and member state practices;
4. Legislation proposed in the scope of the CMU must be evidence-based;
5. Supervision of the CMU should be as close as possible to the markets and end investors;
6. Regulation should not cut across each other in the search for growth.

These principles are expanded in the WMA CMU Policy Position Paper.

Our key proposals include:

– Recognition of the differences between the retail markets and their consumers. Europe is not a homogeneous continent and legislation, regulation and product diversity must take account of this. The CMU initiative must embrace the ranges of consumer choice necessary to attract individuals into the investment market and allow Europe to flourish. It must also aim to prevent excess regulation from damaging these prospects while ensuring that EU retail financial consumers remain properly protected.

– A recommendation to the European Commission for a pan-EU equity-based retail product based on the UK stocks and shares ISA. This would help to attract retail investors across the continent to invest some of their idle cash deposits now lying in bank vaults and form an alternative to UCITS. The product would be underpinned by the existing EU infrastructure that assures proper listing, prospectus, dealing and reporting arrangements for equity across the continent. Different combinations of equity holdings from different parts of the EU would provide competition between different versions of the product inside the wrapper.

– Releasing SMEs from excessive dependence on bank lending by reforming the corporate bond market to remove restrictions on retail participation, and promoting the AIM market as a place to raise equity finance. Encouragement should be given to more small and/or new EU firms to seek an AIM listing. In the UK approximately 25% of all UK retail trades are AIM-listed securities, and we believe this model should be replicated across the continent.

Liz Field, CEO of the Wealth Management Association stated:

“The WMA welcomes the CMU initiative from the Commission and we believe that it is an excellent opportunity to utilise the millions of European retail investors in order to promote the jobs and growth agenda.

“The WMA calls upon the Commission to carry out an EU-wide survey of retail financial business, highlight best practice and publicise these strengths to improve retail access to capital markets and break down the barriers to retail investment.”

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