EUROPE: Council of the European Union confirms agreement with European Parliament on transparency rules for investment products

Monday April 7 2014

The Permanent Representatives Committee has approved, on behalf of the Council, an agreement reached with the European Parliament on a regulation aimed at improving market transparency for retail investors.

The draft regulation sets out to ensure that retail investors always receive the information they need to take informed decisions. It covers packaged retail and insurance-based investment products (PRIIPs), specifically investment funds, structured deposits and life insurance policies with an investment element.

The draft regulation requires key information documents to be drawn up for PRIIPs, and lays down uniform rules on the format and content of such documents and on their provision to retail investors.
Key information documents should contain relevant information such as the nature and features of the product, whether it is possible to lose capital, the costs and risk profile of the product and relevant performance information. Format, presentation and content should be calibrated to maximise understanding of information and to allow retail investors to compare different PRIIPs. Retail investors should also have an effective right of redress under the applicable national law.

The new requirements will be applicable two years after entry into force of the regulation. This will allow “manufacturers” of PRIIPs and those advising on or selling them sufficient time to prepare for the new rules.

Undertakings for collective investment in transferable securities (UCITS) will not be subject to the regulation for five years, given that these are already subject to key information requirements under directive 2009/65/EC. As part of the review of the regulation four years after its entry into force, the Commission will assess whether this transitional period should be prolonged.

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