Astrea / News / Recovery package for capital markets

21-10-2021

Recovery package for capital markets

Publications | Banken & Finanzen team

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The COVID-19 pandemic, in addition to its impact on people, businesses and healthcare systems, also has an impact on the economies and financial systems of the European Member States.

According to the European Commission, liquidity and access to finance will remain bottlenecks in the wake of the COVID-19 pandemic.

The recovery from the severe economic shock requires limited but targeted changes to European legislation on financial services. The adjustments to the European legislation are aimed at avoiding unnecessary bureaucracy and at taking measures to alleviate the economic turmoil by reducing the administrative burden on the financial sector.

The European legislator has chosen to amend the Markets in Financial Instruments Directive II (hereinafter "MiFID II") by introducing Directive 2021/338 of 16 February 2021 to help the recovery from the COVID-19 crisis. MiFID II is a European directive that includes rules for financial institutions that provide investment and/or ancillary services, i.e. in particular distribute financial instruments and structured deposits.

MiFID requirements aim to protect each category of investor, i.e. non-professional clients, professional clients and eligible counterparties. Some of the requirements have obstructed the smooth execution of investment decisions. The amendment to MiFID II will facilitate the provision of investment services and the conduct of investment business while ensuring the protection of investors.

The most important changes relate to information and reporting requirements:

• An exemption from prior disclosure of costs and commissions relating to distance contracts for the purchase or sale of financial instruments.

 Where the exemption applies, investment firms will be able to provide post-trade information on charges and commissions without undue delay if the investor has agreed to receive this information later and has been given the option to defer the transaction until such time as he has received the information.

• Investment firms may switch from paper-based communication to electronic communication to investors.

 Retail investors may choose to continue receiving paper communications.

EU Member States must transpose the fast-track amendments into national law by 28 November 2021 and apply them by 28 February 2022.

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