Consob recommendation on the distribution of financial products

In a nutshell, CONSOB is recommending: (i) that any financial product issued by intermediaries and distributed to retail clients is admitted to trading on a regulated market or on an MTF; (ii) that the offer price duly discloses its different components (in particular any fees which are not likely to be reflected in the secondary market price), and (iii) actions required in case the intermediary decides not to adhere to the Recommendation.‎ The key objective of the Recommendation is to protect retail clients, in particular in the context of "self-placement", to allow them to easily divest, and considering the impact of new regulatory capital provisions governing bail-in and buy-back market practices, potentially affecting the ability of issuers/intermediaries to maintain liquidity through buy-back undertakings (as it was provided under CONSOB Communication on “illiquid products" dated 02 March 2009, n.9019104).

Intermediaries (including relevant local distributors of the products) will have six months either to implement relevant internal procedures to comply with the Recommendation or to adopt alternative mechanics to guarantee the liquidity. In both cases they must inform CONSOB and if they depart from the Recommendation full details of such alternative measures would need to be provided.

CONSOB is also recommending managers of MTFs to adopt measures allowing issuers to access easily relevant MTFs’ platforms, in order to offer directly their products in the context of primary market transactions, on the basis that this would enhance retail investors’ position.

Finally, as mentioned, CONSOB requires that separate indication of the price component reflecting the value of the fees payable to distributors is given to retail investors, the implied reasoning being that normally the secondary market price and value of the securities would not reflect such component.