Sven Giegold MEP leads applause after Priips rejection

The rejection of ‘Priips’ technical standards has been widely welcomed, with German Green MEP Sven Giegold among others branding the EC’s maths for calculating future returns as misleading.

The European Parliament yesterday voted overwhelmingly to reject proposed technical standards for Priips – or packaged retail and insurance-based investment products – regulation. It was the first time European Commission proposals for financial regulation have been overruled by the EU’s legislature.

The European Commission had proposed ‘regulatory technical standards’ for Priips, which proved highly controversial. The rules would mean funds were not obliged to disclose past performance data in marketing material, and would instead offer projected future returns in three separate market scenarios; ‘unfavourable’, ‘moderate’ and ‘favourable’.

Giegold, one of the leaders of the parliamentary opposition to the proposals, told Funds Europe that the proposed formula for calculating future returns was “overly optimistic” and would’ve misled investors. 

“When you compare actual performance to the results the Commission’s calculations produce, the ‘unfavourable’ scenarios perform better than reality. I’m not opposed to investors taking risks, but I am opposed to investors losing money based on misleading information,” he said.

Another key opposition figure, London Conservative MEP Syed Kamall, said that while parliament was fully behind giving clear and accurate guidance to investors, legislation that he called poor, inaccurate and rushed was unacceptable.

“Unless we get this right it is consumers who will suffer. The average high street investor [looking to open a ISA accounts in the UK] could’ve been given unclear misinformation because their provider was required to do so by this regulation. The European Commission will now have to go back to the drawing board and come up with something that will actually deliver,” he said.

Reaction to the news was overwhelmingly positive across the asset management industry. Florian van Megen, retail markets specialist at the UK Investment Association, said the proposed rules would have led to “extremely flawed and misleading retail investor disclosure”.

“Now is the time for the Commission to produce KID requirements that will give consumers the information they need to make informed investment choices,” he added.

A spokesperson for the European Fund and Asset Management Association said the industry was convinced the standards needed amending to solve inherent flaws and allow past performance to be included so investors “can see if the asset manager has met its objectives in the past”.

“Investors must have the basic facts of what their investment will bring in terms of risks and costs. This is fundamental in terms of trust and confidence from consumers,” he added.

The vote in Strasbourg, which was carried by 602 to 4, followed a recommendation from the European Parliament’s economics and monetary committee earlier this month to vote down the measures. The move was landmark, the first time the committee had moved to reject Commission proposals.

©2016 funds europe

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