Members of the European Parliament (MEPs) adopted on Wednesday a resolution calling for changes to the legislation covering Packaged Retail and Insurance-based Investment Products (PRIIPs). It is now expected that the European Commission submits a new version of the regulatory technical standards (RTS), because the resolution means that the draft RTS will not enter into force in their current form.
Marc-André Bechet, Director Legal & Tax of ALFI says: “We welcome the support expressed by parliamentarians for clearer rules at level 2. In May the European Fund and Asset Management Association (EFAMA) highlighted the need to disclose past performance to investors and also outlined major issues linked to the current calculation and presentation of (transaction) costs. ALFI hopes that these concerns are taken up in a new delegated act from the Commission.”
The vote in plenary was preceded by a debate and vote in the European Parliament’s committee on economic and monetary affairs at the beginning of September, during which MEPs expressed major concerns with the level 2 draft RTS presented by the European Commission end of June 2016. Both the European Parliament and the Council of the EU have a right to object to the rules.
MEPs noted in the resolution that, among other things, if 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. They underlined that the treatment of multi-option products still needs to be clarified, in particular in relation to the explicit exemption granted to UCITS funds under the PRIIPs level 1 Regulation. Moreover, MEPs were of the view that the delegated act as adopted by the Commission contains flaws in the methodology for the calculation of future performance scenarios, and the lack of detailed guidance on the ‘comprehension alert’ creates a serious risk of inconsistent implementation of this element in the key information document across the single market.
The European Parliament therefore has called on the Commission to submit a new delegated act which takes account of the concerns highlighted. In addition, it has called on the Commission to consider a proposal to postpone the level 1 application date (currently set for 31 December 2016) without changing any other provision of level 1 in order to ensure a smooth implementation of the requirements set out in the PRIIPs Regulation and the delegated regulation, and avoid the application of level 1 without RTS being in force in advance.
Marc-André Bechet concludes: “ALFI supports the European Parliament’s calls on the European Commission to present a proposal to postpone the application date of the PRIIPs Regulation, to ensure that the fund industry can implement the regulations for the benefit of retail investors.”