EU ECON Committee reject PRIIPS proposals
02 September 2016 Brussels
Image: Shutterstock
The European Parliament’s Economic and Monetary Committee has voted for a revision of the proposed regulation for packaged retail and insurance-based investment products (PRIIPS) with one Member of the European Parliament (MEP) saying PRIIPS key information documents may be “misleading”.
The committee voted to send proposals for the legislation back to the European Commission for revision. The issue will now be put to a vote in the full European Parliament in September.
PRIIPS is intended to improve investor protection, with the key information document (KID) designed to spell out information on the features, risks and costs of the chosen investment product.
However, MEPs on the committee cited concern around the methods of creating the KID. Committee member Sven Giegold suggested that the formula proposed for the KID could potentially make products seem like they would perform better than they are actually likely to.
He said: “People must know when they take a risk, but this information is misleading.”
The PRIIPS regulation, along with the regulatory technical standards (RTS), are due to come into force on 31 December 2016, although the RTS are not due to be finalised until later this month.
After the vote, another committee member, Syed Kamall, commented: “We are not rejecting the principles behind this regulation, as clear and accurate guidance to investors is crucial. However, we want legislation that will deliver, not tokenistic legislation that is more concerned with meeting a deadline than protecting consumers."
Andrew Watson, product manager for Figaro software products at JHC commented on the committee’s decision, suggesting that this will be welcome news for the industry. He said: “Unfortunately while the spirit of the regulation was (and remains) worthy and desirable, it would appear that the European regulatory authority took this much further and was requiring investment product manufacturers to predict the future.”
“This information does not help investors make sound decisions and could lead to accusations of mis-selling when investment products fail to meet the predictions.”
John Dowdall, managing director of Silverfinch, also commented, saying: “Many in the industry had feared that the short timeframe between now and January meant that manufacturers would reduce the number of investments on offer due to the data collection burden. That outcome that would have disadvantaged both the investors and the manufacturers—an ironic result from legislation designed to help the retail public.”
He added: “The onus is now on the European Commission to address the understandable concerns of the Economic and Monetary Affairs Committee, and ensure that these new rules will be implemented fairly and efficiently across all markets.”
The committee voted to send proposals for the legislation back to the European Commission for revision. The issue will now be put to a vote in the full European Parliament in September.
PRIIPS is intended to improve investor protection, with the key information document (KID) designed to spell out information on the features, risks and costs of the chosen investment product.
However, MEPs on the committee cited concern around the methods of creating the KID. Committee member Sven Giegold suggested that the formula proposed for the KID could potentially make products seem like they would perform better than they are actually likely to.
He said: “People must know when they take a risk, but this information is misleading.”
The PRIIPS regulation, along with the regulatory technical standards (RTS), are due to come into force on 31 December 2016, although the RTS are not due to be finalised until later this month.
After the vote, another committee member, Syed Kamall, commented: “We are not rejecting the principles behind this regulation, as clear and accurate guidance to investors is crucial. However, we want legislation that will deliver, not tokenistic legislation that is more concerned with meeting a deadline than protecting consumers."
Andrew Watson, product manager for Figaro software products at JHC commented on the committee’s decision, suggesting that this will be welcome news for the industry. He said: “Unfortunately while the spirit of the regulation was (and remains) worthy and desirable, it would appear that the European regulatory authority took this much further and was requiring investment product manufacturers to predict the future.”
“This information does not help investors make sound decisions and could lead to accusations of mis-selling when investment products fail to meet the predictions.”
John Dowdall, managing director of Silverfinch, also commented, saying: “Many in the industry had feared that the short timeframe between now and January meant that manufacturers would reduce the number of investments on offer due to the data collection burden. That outcome that would have disadvantaged both the investors and the manufacturers—an ironic result from legislation designed to help the retail public.”
He added: “The onus is now on the European Commission to address the understandable concerns of the Economic and Monetary Affairs Committee, and ensure that these new rules will be implemented fairly and efficiently across all markets.”
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