EUROPEAN UNION: Amendment Proposed Urging Changes to PRIIPs KID rules

Thursday September 1 2016

The European Parliament’s Committee on Economic and Monetary Affairs has backed a motion by MEPs calling for urgent changes to current rules on PRIIPs KID documents, which could lead to a redraft of the regulations if supported by the European Parliament and European Commission.

MEPs tabled the amendment to current packaged retail and insurance-based investment products (PRIIPs) rules on new Key Information Documents (KIDs), saying they could ‘mislead’ retail investors in areas like performance. The methodology does not, in some cases, inform investors that they could lose money, even for products which have regularly led to losses over the recommended minimum holding period.

The motion will now be progressed to the wider European Parliament for debate on 12th September. The European Parliament will then decide whether the European Commission and Council should redraft the current PRIIPs regulatory standards.

London MEP Syed Kamall, one of the leading figures seeking the amendments, said: “The committee would have preferred not to take this drastic step, but we have been hitting our head against a brick wall with the commission. These standards – as they stand – could hurt high street investors, like the millions of people who go into their bank to set up an ISA account. This is not a political decision. A cross-party group of MEPs has come together to say that technical standards need to be accurate. The Commission has dismissed all opposition as industry lobbying but the industry also contains fund providers who support the principle of this legislation but have legitimate concerns. We have a responsibility to listen and question all parties involved.”

The motion was tabled during final discussions on how PRIIPs regulations should be implemented following the completion of draft rules earlier this year, and in advance of the directive’s planned implementation date of 31 December 2016.

The motion said: “Where left unchanged, there is a risk that the rules set out in the delegated regulation go against the spirit and aim of the legislation, which is to provide clear, comparable, understandable, and non-misleading information on PRIIPs to retail investors.”

It argues the methodology for the calculation of future performance scenarios in PRIIPs Key Information Documents does not fulfil the requirement under Regulation (EU1286/2014) to provide information which is “accurate, fair, clear and not misleading”.