key information documents

European Parliament Announces Decision to Reject Delegated Resolution of RTS on Key Information Documents for PRIIPs

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On September 14, 2016, the European Parliament announced its decision to reject the European Commission’s proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance based products (PRIIPs) (Regulation 1286/2014) (PRIIPs KID Regulation). The text of the legislative resolution rejecting the proposed Delegated Regulation sets out a number of reasons why the Parliament decided to reject the Delegated Regulation, including:

  • The need for detailed guidance on the “comprehension alert” without which there is a risk of inconsistent implementation of this component in the KIDs within the single market;
  • The need for clarification surrounding the treatment of multi-option products; and
  • The risk that the rules within the Delegated Regulation are contrary to the purpose of the legislation which is to provide retail investors clear, comparable, non-misleading and understandable information on PRIIPs.

As well as calling on the Commission to submit a new delegated regulation, the European Parliament also calls on the Commission to postpone the application date of the PRIIPs KID Regulation, to ensure that the requirements in the Regulation and Delegated Regulation are implemented smoothly and avoid the application of level 1 without RTS being in force.

ECON Objects to Delegated Regulation on RTS on Key Information Documents for PRIIPs

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The European Parliament published a press release on September 1, 2016 announcing that the Economic and Monetary Affairs Committee (ECON) has voted to object to the European Commission’s proposed Delegated Regulation supplementing the Regulation on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) (Regulation 1286/2014) (PRIIPs KID Regulation). This market is worth up to €10 trillion in Europe.

The proposed Delegated Regulation sets the regulatory technical standards (RTS) on the presentation, content, review and revision of the KID, together with the conditions for fulfilling the requirement to provide such documents.

ECON’s concerns include the fact that the proposed formulas in the KID for predicting investment performance contain flaws which would make performance look far better than it was likely to be. As such, this would be potentially misleading for investors.

The Commission adopted the Delegated Regulation (C(2016) 3999 final) in June 2016. The resolution will now proceed for consideration by the European Parliament in a plenary session to be held September 12-15, 2016. The PRIIPs KID Regulation is to apply from December 31, 2016. The press release does highlight that the Commission is prepared “as a second best option” to allow the PRIIPs KID Regulation to apply without the RTS in place.