European Parliament Calls on Commission to Revise PRIIPs and Delay Implementation
14 September 2016
The PRIIPs Regulation requires financial services firms to prepare a KID that presents certain investment products - such as derivatives, structured products, closed ended alternative investment funds (AIFs) (such as investment trusts) and open ended AIFs and UCITS, and insurance-based investments - to retail investors in a clear and understandable manner.
The Parliament highlighted concerns in relation to the Commission's technical standards, including flaws in the methodology for performance scenarios, which the Parliament believed could be misleading to investors, and the treatment of multi-option products. This reflects concerns raised by the Parliament's Economic and Monetary Affairs Committee (ECON).
Michael Thomas, partner in Hogan Lovells financial institutions sector, said:
"Following ECON's rejection of the technical standards, this vote was to be expected. Financial institutions have been working hard to implement PRIIPs across their product ranges in time for the implementation date of 31 December, despite uncertainty regarding how the Regulation would progress through the European Parliament.
"Now that the Parliament has voted in favour of a revision to the technical standard and delay to the overall package, the Commission will have to go back to the drawing-board. A delay to PRIIPs would be welcomed by the industry, which has been lobbying for implementation to be pushed back to give firms time to prepare KIDs properly."
The Parliament voted by 602 votes in favour to 4 against to call on the Commission to:
- revise the technical standards that set out in detail the format and content of the KID; and
- consider a proposal postponing the application date of the Regulation.
In order for any delay to be implemented, the European Commission will have to agree this with the Parliament. It is not clear how long any proposed delay would be. The PRIIPs Regulation is currently scheduled to become effective from 31 December 2016.
The press release issued by the European Parliament following the vote is here.