The European Parliament’s Committee on Economic and Monetary Affairs has approved the motion by MEPs calling for changes to current rules on Priips KID documents in a bid to deliver greater transparency for retail investors.
The draft motion for resolution from the Econ committee, presented and voted for today, objects to proposed regulatory technical standards for retail investors set by the European Commission.
The motion will now pass to the wider European Parliament for debate on the 12 September as to whether the Commission and Council should redraft the current Priips standards.
A European Parliament spokeswoman says there are two main objections to the Commission’s draft rules: the provision of information about past performance of funds in the KID and the question of whether the current proposals put different providers of Priip products on “an unequal footing”.
This is due to the way insurance products are categorised and how transaction costs are calculated. In July, MEPs already objected to the rules as being misleading for investors.
European Conservatives and Reformists chairman and London MEP Syed Kamall, who is among the leaders of the objection process says MEPs are not rejecting the principles behind the “rushed regulation” but are urging for more clarity and accuracy on the guidance.
Kamall says:”The committee would have preferred not to take this drastic step, but we have been hitting our head against a brick wall with the commission. These standards – as they stand – could hurt high street investors, like the millions of people who go into their bank to set up an ISA account.
“This is not a political decision. A cross-party group of MEPs has come together to say that technical standards need to be accurate. The commission has dismissed all opposition as industry lobbying but the industry also contains fund providers who support the principle of this legislation but have legitimate concerns. We have a responsibility to listen and question all parties involved.”
A group of asset managers, including BlackRock and Schroders, have recently written to the Commission asking to it rethink about excluding past performance data within the KIDs.
Wealth Management Association deputy chief executive John Barrass says if a revision of KID rules happens it would become impossible to implement the regulation on time because it will take several weeks or months before knowing the final outcome.
Overall, the WMA says the regulatory technical standards of Priips are not “well conceived” and should be re-examined to increase clarity for consumers, especially on costs disclosure.
Barrass says: “We now have the cost disclosure requirement of Mifid and the one of Priips, substantially with similar language but there are variations. This means you’ll be presenting two sets of costs statements on the same product.
“There must be clarity of what [the documents] are required to say, which means there must be summary costs, not detailed compound interest costs as most clients don’t understand compound interest.”