The Swedish National Audit Office (Riksrevisionen) has suggested in a new report that more recent local regulations have strengthened consumer protection in the Swedish PPM funds market, but that improvements are needed to EU level regulations affecting the PPM system's overall ability to ensure such protection ongoing.
Tasked with reviewing government policy and execution, the NAO says that a statistical analysis of the financial sector overall points to an increase in problems being experienced at the consumer level over the past five years. This has occurred despite a significant increase in the budget off the Swedish Financial Supervisory Authority (Finansinspektionen) since the global financial crisis. The Authority has indeed introduced requirements that have strengthened consumer protection and transparency, but is still failing to follow through in all areas. For example, the NAO notes that few internal measures of success have been established at Finansinspektionen, and that there is a lack of defined objectives of certain of its thematic reviews.
However, the NAO also notes that other law is acting as a barrier to Finansinspektionen being able to better coordinate and share information with other authorities; it points to data protection law in particular as such a barrier.
When it comes to collective investments, the NAO frames its response in context of the fact that both assets and liabilities of Swedish households have increased significantly in the 2010s.
And despite the fact that by international standards consumers in the country are among the most financially literate, there is a significant dispersion in levels of understanding - a challenge that has grown as more complex fund products have come to market in recent years.
This poses a particular risk in the area of long term savings. The Swedish Investment Fund Association (Fondbolagens förening) notes that when it comes to collective investments accessed via PPM, the NAO has recognised that significant steps have been taken to combat the previous weaknesses in the system: telesales have been banned and marketing of funds and services linked to PPM likewise.
"The tougher demands in order to join the fund supermarket and the tougher demands on following up on the character [of participating providers] have increase consumer protection," the NAO writes in its report.
This is seen as having contributed to a decline in complaints.
However, as noted by the Association and the NAO, the improvements witnessed thus far face challenges that are beyond the control of local regulatory authorities.
The NAO writes: "A continued problem is that in an ever increasingly globalised world, Swedish consumer protection is reliant on factors that sometimes are beyond the control of Swedish authorities. This is true not least in the area of finance, where products such as securities funds are general in their nature and in principle can be marketed everywhere."
"In the EU, oversight is built on the principle of home country oversight. It is the national competent authorities that answer for the oversight of companies that are registered in the country. A failure in consumer protection that has been highlighted, among others, through the experiences in the premium pension system is that companies seemingly intent on bypassing regulations have sought out EU member states where oversight is perceived to be weak. The combination of oversight responsibility in one country, with all or substantial parts of the business in another constitutes a risk that consumer protection is brittle. Finansinspektionen cannot, because of EU law, pursue oversight of companies that are based in other EU member states. But it does partake in the European work to facilitate coordination between countries."
"To improve oversight, and thereby consumer protection, in this area requires clearer demands of EU coordination so that oversight is pursued effectively in all EU member states. An alternative solution would be for countries in the EU to agree that oversight should be conducted in the country where a company's main business is being conducted, in order to create a closer link between oversight and the business. It falls on the government to push supranational questions."