The European Commission rubber-stamping of new rules having to do with the so-called Key Information Document, relating to packaged retail and insurance-based investment products (PRIIPs), has been criticised as “completely inappropriate”.
The Key Information Document (KID) relate to documents that will have to be provided to retail consumers when they buy certain investment products, as of 31 December 2016. These include asset management products and other “packaged” investment products sold by banks or insurance companies.
The EU Commission released its decision to implement the controversial legislation, without any amendments, despite widespread criticism and over what has been claimed to be potentially misleading to investors.
And now, following the ruling, Paul Stanfield, chief executive of The Federation of European Independent Financial Advisers, has hit out at the EU Commission’s decision as he believes that it could lead to investors receiving KID documents that are ‘completely inappropriate’ to the products that they represent.
Area of concern
“One area of concern with regards to the Regulatory Technical Standards (RTS) on KIDs is that for Multiple Option Products (MOPs) such as open-architecture life assurance bonds, the technical standards have interpreted the regulations as to mean that the insurance company will be responsible for providing a KID for each chosen or recommended underlying investment fund or structure,” said Stanfield.
“This is simply not possible – some of the underlying investments presently available, such as individual stocks and shares, will simply not have a KID and the regulations are completely inappropriate to them”
“Not only does this make the RTS unworkable, it will almost certainly lead to a considerable reduction in product and investment choice for investors. Surely regulation should not create such outcomes?”
Last month, as reported, industry figures were queuing up to criticise the latest draft KID document guidelines as “misleading” and “not fit for purpose”, with some calling for a delay of at least 12 months to ensure that mandatory wording of the documents is correct, or risk a future mis-selling scandal.
The European Parliament and Council now have a two-month scrutiny period, which they can extend for a further month. It seems, as Stanfield adds, “unlikely (but not impossible)” that they will go against the EU Commission’s decision.