A majority of the Council of the EU members have backed a one-year delay to the packaged retail and insurance-based investment products (Priips) regulation after parliamentarians rejected Level 2 legislation.
The Council of the EU – the legislative body that represents the 28 member states – said 23 of its members backed a one-year delay to January 1, 2018.
Last week, the body said it would not follow the European Parliament in rejecting the Level 2 legislation outright, after only 19 members – below the qualified majority of 21 – proposed to do so.
The latest move by the Council is in keeping with rhetoric coming from the European Parliament, where several members have said a delay is necessary.
EU legislation is created through agreement between the European Parliament, the Council of the EU and the European Commission. The latter body remains insistent on seeing the rules come into force on January 1, 2017.
The delay calls stem from the European Parliament’s rejection of Level 2 legislation, which includes rules mandating that forthcoming Key Investor Documents (Kids) replace past performance figures with “future projection scenarios”.
These Regulatory Technical Standards (RTS) – proposed by the European Commission – were rejected by over 600 MEPs on September 14. The Commission was then told to come up with new proposals before returning to Parliament for approval.
However, while Parliamentarians rejected the Level 2 legislation, the start date of January 1, 2017 is written in the Level 1 rules. These have already been approved by the trio, meaning any delay would need the backing of all parties.
Investment Adviser reported this week that lawyers believe the stalemate poses a legal risk for advisers and product providers. They said the bodies lacked the time to either approve new technicial standards or delay the rules - meaning proceeding with an implementation date of January 1 without approved Level 2 legislation was the most likely option.
The 23 members calling for a delay included the UK, Ireland, France, the Netherlands and Germany.
In a statement, they said: “We fully support the EU-wide introduction of Kids for retail investors.
“We believe it is important [the] Priips regulation is fully applied and it is essential to meeting the needs of EU citizens. After the rejection of the Priips RTS by the European Parliament, we call on the Commission to consider postponing only the application date of the Priips regulation – thus without any change to any other provision of Level 1 regulation.”