The “CFA Institute Blueprint for the 2024-2029 Legislative Period in the EU” outlines key priorities for regulatory reforms to strengthen EU capital markets and improve investor protection. Informed by CFA Institute research and perspectives from CFA societies across the EU, the blueprint identifies five main areas of focus — Capital Markets Resiliency, Technology, Business Conduct, Sustainability, and Pensions. It aims to provide clear guidance to EU regulators on how to address the evolving challenges within these areas.

Our blueprint also takes a collaborative approach. It delivers a wide range of perspectives and identifies both commonalities and differences in regulatory priorities. By doing so, the document creates a holistic view of what regulatory changes are needed in the next EU legislative period.

The Blueprint’s Key Themes

The blueprint emphasizes the importance of developing a robust capital market in the EU. This includes addressing fragmentation across sectors like banking, asset management, and insurance. It stresses that small adjustments to current legislation won't suffice and calls for comprehensive reforms to mobilize private capital and enhance market integration.

With rapid advancements in technology, there is a growing need for clear regulations, especially concerning the use of artificial intelligence (AI) and the regulation of crypto assets. The blueprint suggests balancing investor protection with innovation, advocating for measured oversight of technologies that impact the financial sector.

The report’s business conduct theme highlights the need for ethical standards in investment recommendations and financial promotions, particularly in the growing role of "finfluencers" (financial influencers). It also advises against a full ban on inducements (financial incentives) to avoid limiting investors' access to a variety of products.

In addressing sustainability concerns around environmental, social, and governance (ESG) data, the report calls for clear, reliable standards for ESG reporting. The blueprint also emphasizes the need for training financial professionals to incorporate sustainability into their decision-making processes.

Regarding pension reform, the blueprint focuses on the need for more measures to help pension systems adapt to changing demographic and economic conditions in the EU.

Key Recommendations for EU Regulators

The blueprint delivers key recommendations to EU regulators aimed at modernizing and enhancing the EU's regulatory framework to ensure that it is equipped to meet the financial challenges of the future while protecting investors and fostering innovation. Among these recommendations are the following:

• Implementing comprehensive reforms across banking, asset management, and insurance to integrate and develop EU capital markets.
• Collaborating globally to define "investment recommendation," including its use by financial influencers.
• Avoiding banning inducements to preserve the variety of financial products available to investors.
• Introducing ethical standards and protection measures for the use of AI in finance.
• Regulating crypto assets in a balanced way, promoting innovation while protecting investors.
• Incorporating gamification techniques in investment apps but add friction to encourage thoughtful investment decisions.
• Standardizing certification for financial professionals providing investment advice across the EU.
• Addressing challenges with unreliable ESG data and the high costs of data collection by creating uniform standards.
• Providing unified definition for SMEs and reducing their disclosure and listing requirements to encourage growth.
• Harmonizing insolvency proceedings across the EU to improve consistency and predictability.

In summation the blueprint finds that the high costs and limited integration are key barriers to EU capital market growth. EU regulators should simplify the regulation for prospectuses to ease the burden on new issuers. A single definition for small and medium enterprises (SMEs) is needed to streamline support measures. Low investor participation in SME markets is due to liquidity and research gaps. And regulators should reduce listing and disclosure requirements for SMEs and provide targeted aid to support small businesses.