The anticipated one-year delay of the packaged retail and insurance-based investment products (Priips) regulation has been widely welcomed.
The European Commission announced the delay after consulting with MEPs this week and the vote came after an earlier rejection by the European Parliament in September of Priips draft regulatory technical standards (RTS), which were considered “flawed and misleading”.
The RTS was intended to form the basis of the key information document (Kid) that would accompany Priips but concerns were raised about the use of “future performance scenarios” rather than past performance.
This led to fears by MEPs that investors would not realise they could lose money, echoing complaints made by some asset managers.
Thomas Richter, chief executive officer of the German investment funds association BVI, said following this week’s delay that there will now be enough time for product providers to implement the regulatory technical standards.
Aside from the removal of past performance in the Kid, there were other concerns. Richter added that one of the key areas which still requires work is the calculation method for transaction costs incurred by investment funds. If not amended “the key information document would become a disinformation document for investors, defeating the point of the legislation”.
The European Fund and Asset Management Association (Efama) also supported the delay although for more logistical reasons. “There is only one reason why we considered a delay absolutely essential, and this is because it is materially impossible and simply unrealistic for product manufacturers and distributors to meet the original 31 December 2016 deadline,” said Efama in a statement.
Richard Frase, a partner at law firm Dechert, said “there has been too much rushed legislation in the last few years”.
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