EUROPEAN UNION: Application Date of PRIIPs Regulation Extended by 1 Year

Thursday November 10 2016

The European Commission has proposed an extension to the date of application of the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs). The one-year extension is being proposed in the interest of ensuring a smooth implementation for European consumers and to ensure legal certainty for the sector.

The PRIIPs Regulation is a key piece of legislation that aims to improve the quality of information provided to consumers. It introduces a standardised factsheet, known as a Key Information Document (KID), which is designed to present the main features of an investment product in a simple and accessible manner.

After the European Parliament (EP) rejected the Regulatory Technical Standards (RTS) that underpin the format and methodology used to compile the KID, both the EP and a large majority of Member States called for a postponement in the entry into application of the Regulation. The European Commission believes that the PRIIPs Regulation is sufficiently clear as well as directly applicable on its own, but would be better served by having the RTS on Key Information Documents already in place. The delay gives issuers and distributors of PRIIPs products until 1 January 2018 to put the provisions in place.

The European Commission is now working closely with the three European Supervisory Authorities (ESAs) to resubmit the revised RTS. The aim is to meet some of the concerns raised by the European Parliament, while not compromising the balance previously achieved. In particular, the Commission has now asked the ESAs to make targeted changes in certain areas (i.e. multi-option products, performance scenarios, comprehension alert and presentation of insurance related costs).

In addition, to ensure greater clarity for insurance companies, the European Commission is inviting the ESAs to develop guidance on the practical application of credit risk mitigation factors under the RTS for insurers. This guidance needs to be in line with the relevant provisions of the RTS and not alter their substance.

The ESAs will now have six weeks to resubmit the revised RTS to the Commission. It must be adopted by the Commission and will then be subject to scrutiny by the European Parliament and the Council. The Commission’s expectation is that the revised PRIIPs framework should be in place during the first half of 2017 and apply as of 1 January 2018.

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