EU Commission adopts new “stress scenarios” for Priips products

The European Parliament is to vote on a set of revised rules suggested today by the EU Commission as part of the Priips regulation, which will add a “stress scenario” for all investments under the regulation.

In September the European Parliament rejected the key set of detailed rules to implement the Priips regulation which it found misleading for consumers. This led the Commission to delay the legislation implementation by a year until 2018.

Following the European Parliament’s rejection of the rules the Commission had to review its original proposals.

In a review published today, the Commission proposes to introduce an additional and obligatory “stress scenario” for Priips investments, which projects outcomes under extreme but plausible market conditions. Consumers will then have a clearer picture of what could happen to their investment, if strongly negative economic conditions materialise, the Commision’s review states.

This scenario will be a fourth one to the existing ‘Unfavourable’, ‘Moderate’ and ‘Favourable’ scenarios which will be part of the KID document.

This is opposed to the original plan to introduce “past performance scenarios” instead, which were highly lobbied by providers.

The Commission also proposes the inclusion of “comprehension alerts” on a common European basis, to help retail investors discern products hard to understand.

MEP Sven Giegold, financial and economic policy spokesperson of the Greens group says: “Today’s adoption is a success for consumer protection. The revised rules will provide a clearer picture to consumers about the risks and benefits of complex retail investment products. Instead of being mislead by over optimistic future return projections, an additional critical outlook will strike a sensible balance of information on gains and losses without overloading retail investors with information.

“Moreover, the rules provide a solid basis for improving transparency among the vast selection of retail investment products: the short “comprehension alert” can effectively flag to retail investors that certain products are particularly complex.”