A crucial pillar of financial service regulation are the rules for a key information document (KID) for retail financial products, which the European Parliament and the Council of the EU member states adopted in 2014 under the regulation on key information documents for packaged retail and insurance-based investment products (“PRIIPs regulation”). Currently, European Parliament, Commission and Council are in the course of implementing this legislation.
As a key step of this working process the European Parliament’s Economic and Monetary Affairs Committee (ECON) has voted today on a set of implementation rules, the so called “delegated regulation”, which aim at setting the PRIIPs regulation in practice. The content of the delegated regulation on PRIIPs was originally proposed by the European Supervisory Authorities (ESAs) and was then adopted by the European Commission. The Members of the European Parliament (MEPs) in charge of the PRIIPs implementation work and representatives of Commission and ESAs have been in contact throughout this process. By today’s vote, the members of the European Parliament’s Economic and Monetary Affairs Committee (ECON) expressed their position on the implementation rules. Greens ensured that concerns over consumer protection are at the heart of these concerns. The next step will be a vote by the European Parliament’s plenary in the September session. Between the two aforementioned voting procedures, further negotiations between the MEPs in charge of the implementing the PRIIPs regulation and the European Commission are possible.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“With the rejection of the Commission’s proposal, we have protected consumers from misleading information on investment products. The Commission’s proposal would lead to unrealistic positive projections for many products. The projections would show a profit for products in scenarios, where the actual value of an investment would be a loss. With today’s vote, the MEPs make sure that financial product information do not misguide European consumers.
Moreover, today’s vote shows that the European Parliament exercises effective control over this stage of the legislative process led by the EU-Commission. In the past, the Commission has often ignored the position of the European Parliament at the so called second level of the legislative process. With the rejection of the proposal, the EU-Commission gets its comeuppance for ignoring the European Parliament’s positions on this at this stage of the legislative process in the past.
Despite showing the Commission a yellow card, we are strongly committed to finalise the implementation of the PRIIPs regulation. The PRIIPs regulation will promote competition and comparability for retail investments accross borders and financial products. That is why we do not challenge the PRIIPs regulation. Also, insurance based products have to be fully covered by the rules. However, we have to make sure that the PRIIPs regulation works effectively in practice to empower consumers in their investment decisions. The European Parliament will now look for a swift way to find a solution with the Commission.”
Please find a graphical and verbal explanation of a the key shortcoming in the implementation of the PRIIPs regulation, related to the projections for future returns of retail investment products here: https://sven-giegold.de/wp-content/uploads/2016/09/PRIIPS-performance-scenario-shortcoming-graph-and-explanation.pdf
You find the resolution for objection as voted by ECON: HERE