European Commission officially delays Priips to January 2018

EU-Euro-Europe-Eurozone-700x450.jpgThe European Commission has officially announced today the 12-month delay of the introduction of its Priips regulation.

As already revealed by Fund Strategy’s sister title Money Marketing in October, the EC had decided to delay the introduction of Priips, or packaged retail and insurance-based investments, by one year to 2018, instead of January next year.

The EC met on 27 October with a Council Working Group to discuss the delay, it is understood, as well as yesterday, when it held discussions between MEPs to finalise an agreement over the delay, as confirmed by German and Green MEP Sven Giegold in a blog post.

Priips, which will apply to a wide range of firms, including banks, insurers, and investment managers, aims to extend Mifid II standards on consumer protection to insurance-based investment products.

The decision comes after months of debates, which culminated in the vote from the European Parliament to reject the current regulatory technical standards for the implementation of Priips’ Key Information Document.

A group of asset managers, including BlackRock and Schroders, have also written to the Commission asking to it rethink about excluding past performance data within the KIDs.

The EC says the year extension is proposed “exceptionally in the interest of ensuring a smooth implementation for European consumers and to ensure legal certainty for the sector.”

EC vice-president Valdis Dombrovskis, responsible for Financial Stability, Financial Services and Capital Markets Union says: “Priips is an important piece of legislation that will provide consumers with accessible and transparent information on complex investment products. To ensure legal certainty and a smooth implementation for consumers we are today proposing to extend the date of application by one year.

“The extension should be limited to one year only and we are glad that the European Parliament and the Council are supportive of the view that the substance of the rules should not be re-opened.”

Next steps

The Commission expects the revised Priips framework to be in place during the first half of 2017 and apply as of 1 January 2018.

It has asked the European Supervisory Agencies to make “targeted changes” in certain areas of the RTS such as multi-option products, performance scenarios, comprehension alert and presentation of insurance related costs.

The Commission is also inviting the ESAs to develop guidance on the application of credit risk mitigation factors under the RTS for insurers. The guidance needs to be in line with the relevant provisions of the RTS and not alter their substance, the EC says.

The ESAs will now have six weeks to resubmit the revised rules to the Commission.

It will have then to be adopted by the Commission and be subject to scrutiny by the  Parliament and the Council.

Earlier in November, regulatory experts have already expressed concerns over the next steps providers will need to take before Priips’ implementation date kicks off.

MEP Syed Kamall, who is among the leaders of the objection process on the re-draft of the RTS within the legislation, previously told Fund Strategy delaying Priips by one year to 2018 might not be enough to guarantee clarity on its drafted regulatory technical standards.

Brown Brothers Harriman head of regulatory intelligence Sean Tuffy adds that “obviously” Priips delay is not a surprise, but says: “More than anything, I think the industry will appreciate finally having clarity over the implementation timeline.  I actually think it makes sense to align Priips and MIFID II, as the are both key to  EU policymakers’  goal  of increasing  investor protection.

“The two were originally slated to go live at the same time, until the MiFIDII date was pushed out last year.  That said, it does mean that asset managers will have a busy year ahead implementing to big pieces of regulatory change.”