ECON (the EU Parliament’s Committee on Economic and Monetary Affairs) voted (on 1rst September) to reject the delegated regulation (PRIIPs RTS) as proposed by the Commission on 30 June 2016. ECON claims that the proposed PRIIPs RTS contain inadequacies which could lead to a different interpretation throughout the Member States and that there is a risk that the retail investor would be misled by the information to be disclosed in the PRIIPs KID. Thus the primary goal of the PRIIPs Regulation (i.e. to protect retail investors) would not be met.
ECON’s vote will now have to be ratified by the plenary session of the EU Parliament before the end of September. Should the EU Parliament sustain today’s vote, a delay in the PRIIPs application date, currently set at 31 December 2016, may become likely. It would be the first time, that the EU Parliament rejects a delegated financial services regulation.
The PRIIPs RTS proposed by the Commission earlier this year were intensively discussed throughout the entire industry. Critical voices identified a number of issues, such as information relating to charges and investment performance as well as the treatment of multi-option products, which would require further clarification in order to ensure a level playing field for all market participants and to give retail investors the possibility to effectively compare investment products.
The PRIIPs Regulation applies to all packaged product manufacturers and distributors across the financial industry, and introduces a new mandatory disclosure document, the PRIIPs KID, for 2017, applicable to any packaged retail and insurance-based investment product (PRIIPs) originating at insurance, banking and asset management houses and offered to retail investors, such as unit-linked life insurance products, retail structured securities and deposits, derivatives, investment funds, and even instruments issued by SPVs, in addition to private pensions. The PRIIPs KID shall provide retail investors with comparable, standardised and comprehensible information on PRIIPs in succinct, plain language so as to make different products as comparable as possible and to ensure that investors are ultimately able to choose the product best suited to their needs. UCITS and certain AIFs are grandfathered and may continue to use the KIID until the end of 2019.
Despite today’s development, we recommend to continue implementing the PRIIPs KID while closely following further developments. We, and our sister company Arendt Regulatory and Consulting, are available to discuss with you the impact of the PRIIPs Regulation on your business and offer legal and regulatory advice or assistance.