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RUSSIA G20 Conference: “Empower consumers of financial products and services thourgh imporved financial

literacy/capability and effective consumer protection system”Session 6: Disclosure and Transparency

Moscow, 14 June 2013

David M. Ortega Peciña – Organización de consumidores y Usuarios (Spain)

 

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We lost our home!I can’t repay my debts!

She has no

credit!

They lost their savings!

He didn’t know how much the credit really costed!

Why consumers need proper disclosure

• Information is one of the eight ‘legitimate consumer needs’ recognised by the UN Guidelines for Consumer Protection

• Similarly, article 37 e), mentions that consumer education and information programmes should cover “…Information on weights and measures, prices, quality, credit conditions and availability of basic necessities”.

• Catastrophic consecuences for consumers if they do not have the right information to make the right choices

Why consumers need proper disclosure

A case study from Spain: the “preferred shares” scandalhttp://www.youtube.com/watch?v=sFNneZLoz8ESome highlights:• Almost 1,000,000 affected people• Losses of about 75% of initial investments• “Troika” MoU imposes loses to be born not only

by taxpayers but also by equity holders• Typical savers were transformed into equity

holders and therefore not covered by deposit guarantee schemes anymore

Why consumers need proper disclosure

• How much did people lose?

Disclosure principles• CI’s requirements for consumer information

are that it be: clear, sufficient, reliable, comparable and timely, suitable in these respects for the consumer to compare and contrast and to make an informed decision.

• Consumer credit information

• Key-fact Statements

Disclosure principlesOECD’s high level principles:

• Financial services providers and authorised agents should provide consumers with key information that informs the consumer of the fundamental benefits, risks and terms of the product.

• They should also provide information on conflicts of interest associated with the authorised agent through which the product is sold.

Disclosure principlesOECD’s high level principles (2):

• The provision of advice should be as objective as possible and should in general be based on the consumer’s profile considering the complexity of the product, the risks associated with it as well as the customer’s financial objectives, knowledge, capabilities and experience.

• Consumers should be made aware of the importance of providing financial services providers with relevant, accurate and available information.

Disclosure principlesPossible conflicts of interest:

• Sales incentives

• Prudential issues

Disclosure principlesEU proposals on the pipeline:

• Regulation on Key Information Document for Investment Products (KID)

• MiFID 2