The European Commission has released a revamped version of its Packaged Retail and Insurance-based Investment Products (PRIIPs) regulation.
The updated documents have been amended following, as reported, the landmark rejection of last year’s proposals subsequent delay of the official application date of the PRIIPs regulation, until 1 January 2018, by the European Parliament.
The new documents include revised regulatory technical standards (RTS) – with new rules for the Key Investor Documents (KID) including future projections based on ‘unfavourable’, ‘moderate’ and ‘favourable’ circumstances.
There will also be an additional ‘stress’ scenario added in a bid to appease European MPs (MEPs) and follows criticisms from numerous fund groups and trade bodies that warned that investors could be mislead by the original plans.
The EC has, however, opted not to change the underlying methodology used to calculate these future projections, despite MEPs objections.
The Commission has also proposed the inclusion of ‘comprehension alerts’ on a common European basis, to identify to retail investors when a product could be hard to understand.
“The revised rules will provide a clearer picture to consumers about the risks and benefits of complex retail investment products,” he said.
“Instead of being mislead by over optimistic future return projections, an additional critical outlook (‘stress scenario’) will strike a sensible balance of information on gains and losses without overloading retail investors with information.”
In addition, Giegold said the short “comprehension alert” can warn retail investors that certain products are particularly complex. He added that he felt that many interest groups and “especially the insurance industry” have tried to use this review process to promote their “inappropriate special interests”.
“All lobbying failed to introduce “past performance scenarios” which are prone to mislead investors as the past is a bad indicator for predicting the future,” said Giegold.
“However, through good cooperation, the negotiators from the Commission and European Parliament stood firm and did not fall for these special interest voices. It is now time to fast track the new rules through an early non-objection decision by the Parliament.”