THE EUROPEAN OUTLOOK ON TOTAL COST REPORTING
In light of the discussions in Canada on the CSA and CCIR’s joint 31-103 Amendment Proposal requiring total cost reporting of embedded fees paid by investment fund and individual variable insurance contract holders, IIAC Members will find the following report noteworthy.
In brief, on May 31, 2022, the European Securities and Markets Authority (ESMA) published a final report on the 2021 costs and fees of Undertakings for Collective Investment in Transferable Securities (UCITS) across the EU. The findings in the report raise concern about undue costs being imposed on investors, the absence of appropriate price-setting policies and procedures, and overall divergent market practices of fees and disclosures. Specifically, on the topic of investor compensation, ESMA stressed the importance of ensuring that investors are adequately compensated in all cases where they were charged with undue costs or fees, and also in cases where there were calculation errors that resulted in a financial detriment for investors. ESMA further invited National Competent Authorities (organizations within each EU jurisdiction that have the legally delegated or invested authority, or power to perform a designated function, normally monitoring compliance with the national statutes and regulations) to consider enforcement actions in the cases where a significant regulatory breach was identified.