On 1 September 2016, the European Parliament’s Economic and Monetary Committee (ECON) unanimously rejected the European Commission’s investor protection proposals.
The Commission’s proposal
The European Commission had set out regulatory technical standards (RTS) to provide greater protection to consumers who are interested in investing in packaged retail and insurance-based investment products (PRIIPs). The RTS are supposed to accompany the PRIIPs Regulation (No 1286/2014 of 26 November on key information documents for packaged retail and insurance-based investment products) which will enter into force on 31 December 2016.
The proposals were designed to implement a higher transparency level for PRIIPs and to improve the accompanying information for retail consumers. The issues raised by ECON are related to the key investment document (KID). The KID provides consumers with information about the features, risks and costs of an investment product, based on which consumers can make an investment decision.
Reason for rejection
The members of ECON provided the European Commission with several objections on the proposed RTS prior to the voting process. Earlier remarks were not accounted for by the European Commission in the final RTS that were presented to ECON for voting on 1 September 2016. This has led to a unanimous rejection. The members found the proposals flawed and not fit for purpose due to their not adequately reflecting the risk level.
The proposals have now been sent back to the European Commission for revision.
Consequences for the application date
ECON’s vote will now have to be ratified by the plenary session of the European Parliament before the end of September. It remains unclear whether this will result in a pushback of the deadline for the PRIIPS regulation implementation, which is currently set at 31 December 2016. For such deadline pushback to occur, an additional voting procedure will be required.