Europe's top securities regulator said today (Thursday) that the rules governing how investment firms deal with retail clients have become too burdensome and in many cases simply ineffective, and that it now intends to act.
The European Securities and Markets Authority (EMS)A published findings from a year-long Call for Evidence on the retail investor journey, gathering input from 96 stakeholders including brokers, consumer groups, and trade associations.
The picture that emerged is not flattering for a framework that has been in place for nearly a decade. FinanceMagnates.com covered the launch of that consultation when ESMA openly asked whether its own rules were making investing harder.
ESMA Chairwoman Verena Ross said the work would translate into concrete action. "ESMA will take forward concrete work to make it easier for retail investors to participate in the EU capital markets," she commented, adding that the effort "requires ESMA to work in a joint effort with market participants, the European Commission, co-legislators and national governments."
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Nobody Is Reading the Documents
The clearest indictment in the report concerns the Key Information Document, the consumer-facing summary that regulators designed to help retail investors make informed choices. According to data cited by ESMA, only 1% to 10% of clients in online environments actually open KIDs. Yet producing and delivering them costs firms considerably.
That sits alongside other hard-to-defend numbers. Pre-contractual documentation runs between 50 and 100 pages. Basic information brochures can reach 200 pages. Most of it, respondents told ESMA, goes unread.
The regulator acknowledged the requirements are "not fit for the digital age," built around static PDFs rather than the mobile interfaces most retail investors now use. The question of whether MiFID II has caused more harm than good is one FinanceMagnates.com has examined before, and Thursday's report answers it, at least partly, with the regulator's own data.
ESMA said it will move toward layered, mobile-friendly disclosures and use consumer testing to validate any changes, including for mobile-first users.
Suitability and Sustainability Both Get Simplified
On suitability assessments, stakeholders backed the principle but said the implementation generates significant administrative work for firms and confusion for clients. Many retail investors reportedly find the process opaque, unclear about why they need to provide granular financial data or how it affects the advice they receive.
ESMA said it is considering an event-driven model, where profile updates are triggered by material changes rather than fixed schedules, a shift that would reduce repetitive compliance work for platforms and brokers. This matters particularly as ESMA has simultaneously been expanding the scope of appropriateness requirements to cover products like perpetual futures.
For sustainability preferences, the signal was even clearer. The current three-step ESG integration in suitability assessments was widely described as "excessively complex," with the vast majority of clients reportedly stating no preference when asked. ESMA said it will pursue "significant simplification," which amounts to the most concrete relief offered to compliance teams in the report.
Young Investors and the Unregulated Alternative
The report also addressed why younger investors are bypassing traditional regulated platforms. ESMA cited high return expectations, social media influence, streamlined neobroker onboarding, and distrust of traditional financial institutions as the main drivers.
Retail trading demand hit a record in early 2026, up 25% from its prior peak, which underscores the point: the appetite is there, but regulated channels are losing the competition for it.
Tax Remains the Hardest Problem
Beyond regulation, tax drew some of the sharpest commentary. Cross-border withholding tax reclaims can take up to two years. In Germany, the average refund in 2024 took 615 days.
About 70% of European investors reportedly do not even attempt a reclaim, finding it too complex or too costly. More than 31% said they intend to stop buying foreign EU shares because of it. Respondents called for a pan-European savings account framework modelled on successful schemes in Sweden, France, and the UK.
ESMA said Thursday's findings will guide its upcoming technical advice on MiFID II delegated acts, aligned with the Retail Investment Strategy, on which political agreement was recently reached.
The report lands as the regulator is also managing new derivatives reporting standards for CFD providers due within 15 months, new MiFID II client-tagging requirements for CFD brokers, and a fresh systemic risk warning published just two days ago.
Thursday's report, in plain terms, confirms what the industry has argued for years: the rules designed to protect retail investors have also made it considerably harder for them to invest.
