European Parliament’s ECON Committee reject PRIIPs RTS

Parliament’s Economic and Monetary Committee rejected as “misleading” and flawed, proposals aimed at providing greater protection to consumers buying packaged financial products, and unanimously voted to send the proposals back to the European Commission.

The MEPs supported by 55 votes to 0, with 3 abstentions, a resolution which called for changes to the legislation covering “packaged retail and insurance-based investment products” (PRIIPS) -- a market worth up to €10 trillion in Europe -- which consumers typically tap into when saving for a certain amount of money such as buying a house or paying for their children’s education.

The Commission’s proposals set the regulatory technical standards (RTS) which investment providers would have to meet to provide greater transparency about investment products and clearer information to investors. The RTS are designed to accompany the PRIIP legislation which is due to come into force on 31 December 2016.

Much of MEPs’ opposition centres on the “Key Investment Document” (KID) which is meant to provide consumers with information about the features, risks and costs of an investment product. But Sven Giegold (Greens, DE) argued that proposed formulas for predicting investment performance contained flaws which would make performance look far better than it was likely to be. “People must know when they take a risk, but this information is misleading,” he said.

The measure will now be put to a full plenary vote in September and Parliament must now either support or reject the motion.

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