The guidelines are largely designed to enhance information disclosure whenever different products are cross-sold with one another in the banking, insurance and securities sectors across the European Union.
Among the new requirements, which will take effect from 3 January 2017, there are new guidelines on addressing conflicts of interest arising from remuneration models, and on ways to improve client understanding on whether purchasing the individual products offered in a package is possible.
Under the remuneration guidelines, firms will be required to refrain from operating remuneration policies, practices and performance-based competitions that encourage sales staff who may be remunerated on a commission basis to ‘push’, the sale of the bundled package.
ESMA said this practice may encourage the unnecessary or unsuitable sales of either a component of the package or the package itself.
It cited the example of where sales staff are incentivised to cross-sell a loan with a brokerage account, then as a result of this remuneration structure, there would be the risk of incentivising a potential mis-selling of the loan and therefore also of the package.
Information flow
Firms distributing a bundled package of products will also be required to ensure that they present their purchase options in a way which avoids giving a false perception that the purchase of the bundled package is compulsory when in fact it is an optional purchase.
Firms which distribute the tied or bundled package will also be required to ensure that information on the non-price features and risks of the package is presented to clients in a way which is not misleading or which distorts the impact of these factors for the client.
