Europe’s
top securities regulator said today (Thursday) that the rules governing how
investment firms deal with retail clients have become too burdensome and in
many cases simply ineffective, and that it now intends to act.
The
European Securities and Markets Authority (EMS)A published
findings from a year-long Call for Evidence on the retail investor journey,
gathering input from 96 stakeholders including brokers, consumer groups, and
trade associations.
The picture
that emerged is not flattering for a framework that has been in place for
nearly a decade. FinanceMagnates.com
covered the launch of that consultation when ESMA openly asked whether its own
rules were making investing harder.
Verena Ross, ESMA’s Chair
ESMA Chairwoman Verena Ross said the work would translate into concrete action. “ESMA will
take forward concrete work to make it easier for retail investors to
participate in the EU capital markets,” she commented, adding that the
effort “requires ESMA to work in a joint effort with market participants,
the European Commission, co-legislators and national governments.”
Nobody Is Reading the
Documents
The
clearest indictment in the report concerns the Key Information Document, the
consumer-facing summary that regulators designed to help retail investors make
informed choices. According to data cited by ESMA, only 1% to 10% of clients in
online environments actually open KIDs. Yet producing and delivering them costs
firms considerably.
That sits
alongside other hard-to-defend numbers. Pre-contractual documentation runs
between 50 and 100 pages. Basic information brochures can reach 200 pages. Most
of it, respondents told ESMA, goes unread.
The
regulator acknowledged the requirements are “not fit for the digital
age,” built around static PDFs rather than the mobile interfaces most
retail investors now use. The question of whether MiFID
II has caused more harm than good is one FinanceMagnates.com has examined before, and Thursday’s
report answers it, at least partly, with the regulator’s own data.
ESMA said
it will move toward layered, mobile-friendly disclosures and use consumer
testing to validate any changes, including for mobile-first users.
Suitability and
Sustainability Both Get Simplified
On
suitability assessments, stakeholders backed the principle but said the
implementation generates significant administrative work for firms and
confusion for clients. Many retail investors reportedly find the process
opaque, unclear about why they need to provide granular financial data or how
it affects the advice they receive.
ESMA said
it is considering an event-driven model, where profile updates are triggered by
material changes rather than fixed schedules, a shift that would reduce
repetitive compliance work for platforms and brokers. This matters particularly
as ESMA has simultaneously been expanding the
scope of appropriateness requirements to cover products like perpetual futures.
For
sustainability preferences, the signal was even clearer. The current three-step
ESG integration in suitability assessments was widely described as
“excessively complex,” with the vast majority of clients reportedly
stating no preference when asked. ESMA said it will pursue “significant
simplification,” which amounts to the most concrete relief offered to
compliance teams in the report.
Young Investors and the
Unregulated Alternative
The report
also addressed why younger investors are bypassing traditional regulated
platforms. ESMA cited high return expectations, social media influence,
streamlined neobroker onboarding, and distrust of traditional financial
institutions as the main drivers.
Retail trading
demand hit a record in early 2026, up 25% from its prior peak, which underscores the point: the
appetite is there, but regulated channels are losing the competition for it.
Tax Remains the Hardest
Problem
Beyond
regulation, tax drew some of the sharpest commentary. Cross-border withholding
tax reclaims can take up to two years. In Germany, the average refund in 2024
took 615 days.
About 70%
of European investors reportedly do not even attempt a reclaim, finding it too
complex or too costly. More than 31% said they intend to stop buying foreign EU
shares because of it. Respondents called for a pan-European savings account
framework modelled on successful schemes in Sweden, France, and the UK.
ESMA said
Thursday’s findings will guide its upcoming technical advice on MiFID II
delegated acts, aligned with the Retail Investment Strategy, on which political
agreement was recently reached.
The report
lands as the regulator is also managing new
derivatives reporting standards for CFD providers due within 15 months, new MiFID II
client-tagging requirements for CFD brokers, and a fresh systemic
risk warning published just two days ago.
Thursday’s
report, in plain terms, confirms what the industry has argued for years: the
rules designed to protect retail investors have also made it considerably
harder for them to invest.
Europe’s
top securities regulator said today (Thursday) that the rules governing how
investment firms deal with retail clients have become too burdensome and in
many cases simply ineffective, and that it now intends to act.
The
European Securities and Markets Authority (EMS)A published
findings from a year-long Call for Evidence on the retail investor journey,
gathering input from 96 stakeholders including brokers, consumer groups, and
trade associations.
The picture
that emerged is not flattering for a framework that has been in place for
nearly a decade. FinanceMagnates.com
covered the launch of that consultation when ESMA openly asked whether its own
rules were making investing harder.
Verena Ross, ESMA’s Chair
ESMA Chairwoman Verena Ross said the work would translate into concrete action. “ESMA will
take forward concrete work to make it easier for retail investors to
participate in the EU capital markets,” she commented, adding that the
effort “requires ESMA to work in a joint effort with market participants,
the European Commission, co-legislators and national governments.”
Nobody Is Reading the
Documents
The
clearest indictment in the report concerns the Key Information Document, the
consumer-facing summary that regulators designed to help retail investors make
informed choices. According to data cited by ESMA, only 1% to 10% of clients in
online environments actually open KIDs. Yet producing and delivering them costs
firms considerably.
That sits
alongside other hard-to-defend numbers. Pre-contractual documentation runs
between 50 and 100 pages. Basic information brochures can reach 200 pages. Most
of it, respondents told ESMA, goes unread.
The
regulator acknowledged the requirements are “not fit for the digital
age,” built around static PDFs rather than the mobile interfaces most
retail investors now use. The question of whether MiFID
II has caused more harm than good is one FinanceMagnates.com has examined before, and Thursday’s
report answers it, at least partly, with the regulator’s own data.
ESMA said
it will move toward layered, mobile-friendly disclosures and use consumer
testing to validate any changes, including for mobile-first users.
Suitability and
Sustainability Both Get Simplified
On
suitability assessments, stakeholders backed the principle but said the
implementation generates significant administrative work for firms and
confusion for clients. Many retail investors reportedly find the process
opaque, unclear about why they need to provide granular financial data or how
it affects the advice they receive.
ESMA said
it is considering an event-driven model, where profile updates are triggered by
material changes rather than fixed schedules, a shift that would reduce
repetitive compliance work for platforms and brokers. This matters particularly
as ESMA has simultaneously been expanding the
scope of appropriateness requirements to cover products like perpetual futures.
For
sustainability preferences, the signal was even clearer. The current three-step
ESG integration in suitability assessments was widely described as
“excessively complex,” with the vast majority of clients reportedly
stating no preference when asked. ESMA said it will pursue “significant
simplification,” which amounts to the most concrete relief offered to
compliance teams in the report.
Young Investors and the
Unregulated Alternative
The report
also addressed why younger investors are bypassing traditional regulated
platforms. ESMA cited high return expectations, social media influence,
streamlined neobroker onboarding, and distrust of traditional financial
institutions as the main drivers.
Retail trading
demand hit a record in early 2026, up 25% from its prior peak, which underscores the point: the
appetite is there, but regulated channels are losing the competition for it.
Tax Remains the Hardest
Problem
Beyond
regulation, tax drew some of the sharpest commentary. Cross-border withholding
tax reclaims can take up to two years. In Germany, the average refund in 2024
took 615 days.
About 70%
of European investors reportedly do not even attempt a reclaim, finding it too
complex or too costly. More than 31% said they intend to stop buying foreign EU
shares because of it. Respondents called for a pan-European savings account
framework modelled on successful schemes in Sweden, France, and the UK.
ESMA said
Thursday’s findings will guide its upcoming technical advice on MiFID II
delegated acts, aligned with the Retail Investment Strategy, on which political
agreement was recently reached.
The report
lands as the regulator is also managing new
derivatives reporting standards for CFD providers due within 15 months, new MiFID II
client-tagging requirements for CFD brokers, and a fresh systemic
risk warning published just two days ago.
Thursday’s
report, in plain terms, confirms what the industry has argued for years: the
rules designed to protect retail investors have also made it considerably
harder for them to invest.
