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European Commission proposes legislation to improve consumer protection in financial services

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The European Commission has presented a financial services legislative package designed to raise standards and remove loopholes for the benefit of consumers.

Specifically, the package proposes new, consumer-friendly standards for information about investments, raises standards for advice, and tightens certain rules on investment funds to ensure their safety.

The Commission believes that the financial crisis has become a crisis of consumer confidence. Lack of transparency, low awareness of risks, and poor handling of conflicts of interest have meant that consumers across the EU have been repeatedly sold investment and insurance products that were not right for them. Consumers have had their faith in the financial sector shaken. In addition, existing legislation has not developed fast enough to reflect the growing complexity of financial services.

Only by taking steps to tackle these shortcomings, says the Commission, can low consumer confidence be tackled, laying strong foundations for growth in the EU. Strong, well-regulated retail markets that place the best interests of consumers at their heart are necessary for consumer confidence and economic growth in the medium and longer term.

Internal Market and Services Commissioner Michel Barnier, says: "In the aftermath of the biggest financial crisis in recent memory, the financial sector must place consumers at its heart. Retail products must be safer, information standards must become clearer, and those selling products must always be subject to the highest standards. That is why we have adopted a package solely dedicated to consumers, so that they can choose financial products based on clear and sound information and professional advice which puts the consumer’s interests first."

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