Currently, European Parliament, Commission and Council are in the course of implementing a crucial pillar of financial service regulation: the rules for a key information document (KID) for retail financial products, which European Parliament and Council adopted in 2014 under the regulation on key information documents for packaged retail and insurance-based investment products (“PRIIPs regulation”).
During the ongoing work to put the PRIIPs regulation in practice, the European Parliament’s Economic and Monetary Affairs committee (ECON) rejected a set of implementation rules proposed by the EU-Commission on 1 September. One key rationale for this rejection was on Green initiative that the Commission’s proposals could not properly correct the shortcoming that the rules would have been misleading for consumers because of over-optimistic projections of future investment returns. In contrast to the vote in Committee on September 1, the result of today’s Plenary vote is of binding character for the European Commission. The parliament’s plenary confirmed the rejection of the delegated act and thus gives the Commission a ‘mandate’ to review the set of implementation rules. It is also the first time that Parliament rejects implementation rules proposed by the Commission for financial markets.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“The European Parliament’s rejection today states clearly: In case of doubt, the protection of consumers comes first. Financial product information must not mislead consumers. This means especially that future return projections for PRIIPs products such as investment funds must not be over optimistic. The Commission could not convince MEPs with its last minute fixes. When revising the rules now, the Commission has to make sure that these reviewed rules will be legally sound to work properly in practise.
By today’s vote the European Parliament has for the first time rejected Commission proposals for implementation rules in financial regulation. Thereby, MEPs prove their ability to scrutinise second level implementation rules, in addition to negotiating the EU regulations and directives to which they relate. The Commission should read the sign on the wall that ignoring Parliament’s concerns – as has happened in this and earlier cases – will not be accepted and only prolong the process.
The European Parliament’s decision to reject the detailed PRIIPs implementation rules is because it does not meet the requirements of clear, fair and non-misleading information as set out in this key Regulation consumer protection. It promotes healthy competition across borders, and improves consumers’ choice and benefits. No other provision in the content of the PRIIPs regulation itself should be changed, with the possible exception, of the date of entry into force. The broad majority in Parliament endorsed this focus for Commission’s future work in a an oral amendment to the resolution.
After today’s vote, we will maintain close contact with the Commission to help finding solutions which contribute to a swift revision of the PRIIPs implementation rules.”
Please find our comment on the rejection of the PRIIPs rules by the ECON committee on 1 Sep 2016 here: https://sven-giegold.de/2016/priips-abstimmung/